Key Takeaways
- Manpower supply and staffing services attract GST at 18% (9% CGST + 9% SGST, or 18% IGST) under the SAC 9985xx series.
- General manpower supply is not under RCM by default. RCM applies only to security personnel supply (when a non-body-corporate supplies to a registered body corporate) or when the supplier is unregistered and Section 9(4) applies.
- The taxable value includes wages, statutory dues recovered (PF, ESI), and the agency's commission or markup. GST at 18% is levied on the entire amount.
- Recipients can claim Input Tax Credit on GST paid for manpower supply. Staffing services are not blocked under Section 17(5).
- E-invoicing is mandatory for manpower agencies with aggregate turnover above Rs 5 crore from April 2026.
- Income-tax TDS under Section 194C / Section 393 applies on the payment value excluding GST: 1% for individual/HUF contractors, 2% for others.
GST on manpower supply services in India is charged at 18% (SAC 998513 for contract staffing, 998514 for temporary staffing). General manpower supply does not attract reverse charge by default, but security personnel supply does under Notification 13/2017-CT (Rate). The recipient can claim full ITC on the GST paid.
Manpower supply is one of the most common B2B service categories in India, covering everything from contract staffing and temporary labour to executive search and payroll outsourcing. The GST treatment is straightforward on the rate (18% flat), but the compliance details, particularly around RCM applicability, taxable-value computation, and the overlap with income-tax TDS, trip up both agencies and their clients regularly.
This guide covers the exact rate, all relevant SAC codes, when RCM does and does not apply, how the taxable value is computed, ITC eligibility, e-invoicing requirements, TDS obligations, and GSTR reporting. The rules below reflect the GST slab structure as of 2026 (the 28% slab was abolished on 22 September 2025; current slabs are 0, 5, 18, and 40 percent; manpower services remain at 18%).
Looking for expert help with GST on manpower supply staffing services RCM SAC code India 2026? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
What Qualifies as Manpower Supply Under GST
Manpower supply means providing workers to a client where the workers perform their tasks under the client's supervision and control, while the staffing agency remains the employer of record. The agency pays wages, handles statutory compliances (PF, ESI), and bills the client a consolidated amount.
Key characteristics that distinguish manpower supply from other service models:
- Control and supervision rest with the recipient, not the supplier
- The agency does not deliver a finished output or result; it provides labour
- Workers may be temporary, contractual, or on a long-term payroll arrangement
- The agency bears the employer obligations (salary disbursement, PF/ESI deposits, TDS on salary)
This is distinct from employee secondment or deputation, where an existing employee of one entity is placed with another. For the GST treatment of secondment arrangements, see our guide on GST on employee secondment and deputation.
GST Rate and SAC Codes for Staffing Services
All manpower supply and staffing services fall under the SAC 9985 group (Support services) and attract GST at a flat 18%.
Tax Rate Chart
GST Rate on Manpower Supply Services (2026)
Flat 18% across all staffing service categories
Manpower supply and staffing services (SAC 9985xx series): contract staffing, temporary staffing, executive search, payrolling, permanent placement
9% CGST + 9% SGST, or 18% IGST for inter-state
Source: GST Tariff, Notification 11/2017-CT (Rate); 18% slab retained after September 2025 restructuring
The SAC codes that apply to different types of staffing services:
| SAC Code | Description | Common Use Case |
|---|---|---|
| 998511 | Executive/retained personnel search services | CXO-level recruitment, retained headhunter mandates |
| 998512 | Permanent placement services | One-time recruitment fees for permanent hires |
| 998513 | Contract staffing services | IT staff augmentation, project-based deployment |
| 998514 | Temporary staffing services | Seasonal labour, short-term factory staff |
| 998515 | Long-term staffing (payrolling) services | Third-party payroll management |
| 998516 | Temporary staffing-to-permanent placement | Temp-to-perm conversion arrangements |
| 998517 | Co-employment staffing services | Joint-employer staffing models |
| 998519 | Other employment and labour supply services | Catch-all for services not classified above |
For practical purposes, the exact SAC sub-code does not change the GST rate (all are 18%), but using the correct code matters for invoice accuracy, HSN/SAC summary in GSTR-1, and audit trail.
Taxable Value: What Gets Included
This is where many staffing agencies and their clients get tripped up. The taxable value for GST is not just the agency's commission or markup. It is the entire amount charged by the agency, including:
- Wages and salaries of the deployed workers
- Statutory contributions recovered from the client (PF employer share, ESI employer share, bonus, gratuity provisions)
- Agency commission or management fee
- Any reimbursements billed as part of the service (travel, uniforms, training costs)
| Component | Included in Taxable Value? |
|---|---|
| Worker wages paid by agency, billed to client | Yes |
| PF/ESI employer contributions recovered | Yes |
| Agency service fee / markup | Yes |
| Reimbursements billed to client | Yes |
| GST component | No (GST is on top) |
Example: A staffing agency deploys 10 workers. Monthly wages: Rs 3,00,000. PF/ESI employer share: Rs 39,000. Agency fee: Rs 61,000. Total billing: Rs 4,00,000. GST at 18% = Rs 72,000. Invoice total: Rs 4,72,000.
The GST Council and multiple Advance Ruling Authority orders have consistently held that the entire consideration, not just the margin, forms the taxable value. Attempting to split the bill and charge GST only on the agency fee is incorrect and exposes both parties to demand notices.
RCM on Manpower Supply: When the Recipient Pays
This is the single most misunderstood area in staffing GST compliance. Many businesses assume that manpower supply is under reverse charge, but general manpower supply is NOT under RCM by default.
The Reverse Charge Mechanism under GST is triggered only for services specifically notified under Section 9(3) of the CGST Act (via Notification No. 13/2017-Central Tax (Rate)) or for supplies from unregistered persons under Section 9(4).
For manpower supply, the position is:
| Scenario | RCM Applicable? | Legal Basis |
|---|---|---|
| Registered staffing agency supplies general manpower to any registered recipient | No | Not notified under Section 9(3) |
| Registered staffing agency supplies security personnel to a registered body corporate (agency is non-body-corporate) | Yes | Notification 13/2017-CT (Rate), amended by Notification 29/2018, effective 1 Jan 2019 |
| Unregistered supplier provides manpower to a registered person | Yes (if Section 9(4) conditions met) | Section 9(4), CGST Act |
| Staffing agency supplies to government for functions under Articles 243G/243W | Exempt | Notification 12/2017-CT (Rate) |
The critical distinction: security personnel supply has its own RCM entry. General staffing (IT contractors, factory workers, office staff, drivers) does not.
For a complete walkthrough of all RCM-notified services, see our Reverse Charge Mechanism (RCM) under GST guide.
How RCM Differs Between Security and General Manpower
The confusion between security manpower and general manpower is the most common compliance error in this space. Here is a side-by-side comparison:
| Parameter | Security Personnel Supply | General Manpower Supply |
|---|---|---|
| RCM under Section 9(3) | Yes, when supplier is non-body-corporate and recipient is registered body corporate | No |
| Notification | 13/2017-CT (Rate), entry via Notification 29/2018 | Not notified |
| Effective date of RCM | 1 January 2019 | N/A |
| Who pays GST (RCM case) | Recipient (body corporate) | N/A (supplier pays under forward charge) |
| Forward charge applies when | Supplier is a body corporate | Always (unless Section 9(4) applies) |
| SAC code | 998525 | 998511 to 998519 |
A staffing agency that supplies both security guards and general office staff to the same corporate client must split the invoicing: security personnel on one invoice (noting RCM applicability), general manpower on a separate invoice under forward charge. Mixing them on a single invoice creates reconciliation problems in GSTR-1 and GSTR-3B.
For the detailed rules on security services RCM, see our GST on security services and agency RCM guide.
Body Corporate Definition: Who Pays Under RCM
The RCM entry for security services hinges on whether the supplier and recipient qualify as a "body corporate." This definition matters because it determines the direction of tax flow.
Under Section 2(11) of the Companies Act, 2013, a body corporate includes:
- Companies incorporated under the Companies Act (private limited, public limited, OPC)
- Bodies incorporated under any other law (statutory corporations)
- LLPs (treated as body corporate per Haryana AAR ruling)
A body corporate does NOT include:
- Sole proprietorships
- Partnership firms (not LLPs)
- Hindu Undivided Families (HUF)
- Association of Persons (AOP) or Body of Individuals (BOI)
- Cooperative societies (unless separately incorporated under law)
| Entity Type | Body Corporate? | RCM on Security Supply (as supplier to registered body corporate) |
|---|---|---|
| Pvt Ltd / Public Ltd company | Yes | No (supplier is body corporate, forward charge applies) |
| LLP | Yes (per AAR) | No |
| Proprietorship | No | Yes (recipient pays under RCM) |
| Partnership firm | No | Yes |
| HUF | No | Yes |
| Cooperative society | Generally no | Yes |
This classification is relevant only for security services RCM. For general manpower, the body-corporate status of the supplier does not trigger or avoid RCM because general manpower is not notified under Section 9(3).
ITC on Manpower Supply Services
Recipients of manpower supply services can claim full Input Tax Credit on the GST paid, whether under forward charge or RCM. Manpower supply is a legitimate business input and is not blocked under Section 17(5) of the CGST Act.
Section 17(5) blocks ITC on specific items such as motor vehicles (with exceptions), food and beverages, health and fitness memberships, travel benefits for employees, works contract for construction of immovable property, and goods or services for personal consumption. Manpower supply for business operations does not fall into any of these blocked categories.
Conditions for ITC claim:
- The recipient must hold a valid GSTIN
- The supplier must have filed the relevant returns (the supply should reflect in GSTR-2B)
- The recipient must have received the supply
- The recipient must have paid the tax (for RCM cases, paid through cash ledger)
- The recipient must have filed GSTR-3B claiming the credit
For RCM payments (applicable in security manpower cases), the recipient pays the GST in cash first, then claims ITC of the same amount. The net cash impact is neutral over time, but working capital is temporarily affected.
For a detailed walkthrough of ITC eligibility and GSTR-2B reconciliation, see our ITC eligibility and GSTR-2B reconciliation guide.
E-Invoicing for Manpower Agencies
E-invoicing (electronic invoicing via the Invoice Registration Portal) is mandatory for businesses with aggregate turnover exceeding Rs 5 crore from April 2026. This threshold applies to manpower supply agencies.
Key compliance points for staffing agencies:
- Every B2B invoice must be reported to the IRP and an Invoice Reference Number (IRN) obtained before issuing to the client
- The e-invoice JSON must include the correct SAC code (998513, 998514, etc.) and the HSN/SAC summary
- For RCM supplies (security services from a non-body-corporate agency), the e-invoice must flag the reverse charge indicator
- Credit notes and debit notes also require IRN generation
- Non-compliance (issuing without IRN) means the invoice is not a valid tax invoice, and the recipient cannot claim ITC on it
Agencies below the Rs 5 crore threshold are not required to generate e-invoices but must still issue GST-compliant tax invoices. For the full e-invoicing rules, see our guides on e-invoice mandatory for Rs 5 crore businesses and GST invoice rules and e-invoice format.
Income Tax TDS on Manpower Supply Payments
Payments to a manpower supply agency are treated as payments to a contractor and attract TDS under Section 194C of the Income-tax Act, 1961 (mapped to Section 393 under the new Income Tax Act 2025).
| Payee Type | TDS Rate |
|---|---|
| Individual or HUF contractor | 1% |
| Any other person (firm, company, LLP, etc.) | 2% |
TDS is deducted on the value excluding GST, provided the GST component is shown separately in the invoice (CBDT Circular No. 23/2017). If the invoice does not break out GST separately, TDS applies on the gross amount.
Example: Agency bills Rs 5,00,000 + Rs 90,000 GST = Rs 5,90,000. If the agency is a company (2% TDS), TDS = 2% of Rs 5,00,000 = Rs 10,000. TDS is not 2% of Rs 5,90,000.
Manpower supply is a contractor service, not a professional or technical service. Section 194J does not apply. If your TDS team is unsure which section governs a specific vendor payment, see our guide on TDS on contractor payments under Section 194C and 393.
GSTR-1 and GSTR-3B Reporting for Manpower Services
For the Supplier (Staffing Agency) Under Forward Charge
| Return | Table | What to Report |
|---|---|---|
| GSTR-1 | B2B invoices (Table 4) | Invoice-wise details with recipient GSTIN, SAC code, taxable value, and GST charged |
| GSTR-1 | HSN/SAC summary (Table 12) | Aggregate value under the relevant SAC code (998513, 998514, etc.) |
| GSTR-3B | Table 3.1(a) "Outward taxable supplies" | Total taxable value and tax on forward-charge manpower supplies |
For the Recipient Under RCM (Security Personnel Only)
| Return | Table | What to Report |
|---|---|---|
| GSTR-3B | Table 3.1(d) "Inward supplies liable to reverse charge" | Taxable value and tax on security personnel received under RCM |
| GSTR-3B | Cash ledger | Pay RCM liability in cash (cannot use ITC to discharge RCM) |
| GSTR-3B | Table 4(A)(3) "Inward supplies liable to reverse charge" | Claim ITC of the RCM tax paid |
For the Recipient Under Forward Charge (General Manpower)
The recipient does not report the supplier's forward-charge supply in GSTR-1 (that is the supplier's obligation). The recipient claims ITC via GSTR-3B Table 4(A)(5) based on GSTR-2B auto-population. Ensure the supplier's invoice reflects in your GSTR-2B before claiming credit.
Common Compliance Mistakes
1. Applying RCM to general manpower supply. Many recipients wrongly pay GST under RCM on general staffing invoices. RCM under Section 9(3) applies only to security personnel supply, not to IT contractors, factory workers, or office staff.
2. Charging GST only on the agency margin. The taxable value is the total billing, including wages and statutory recoveries, not just the agency's service fee. Undervaluing the supply invites demand notices with interest and penalties.
3. Mixing security and general manpower on one invoice. When an agency supplies both categories to the same client, separate invoices are necessary. Security supply may be under RCM (depending on entity type), while general manpower is always forward charge.
4. Deducting TDS on the GST-inclusive gross. Income-tax TDS under Section 194C must be computed on the value excluding GST (when GST is shown separately). Deducting on the full amount over-deducts and creates Form 26AS / AIS mismatches.
5. Missing e-invoice generation. Agencies above Rs 5 crore turnover must generate an IRN for every B2B invoice. Invoices without IRN are invalid, and the recipient cannot claim ITC on them.
6. Treating employee secondment as manpower supply. Secondment (where an existing employee is deputed to another entity) has different GST implications than manpower supply (where the agency provides workers as a service). Conflating the two creates classification disputes. See the employee secondment GST guide for the distinction.
Frequently Asked Questions
What is the GST rate on manpower supply services in India?
Manpower supply and staffing services attract GST at 18% (9% CGST + 9% SGST for intra-state, or 18% IGST for inter-state). This rate applies across all staffing categories: contract staffing (SAC 998513), temporary staffing (SAC 998514), executive search (SAC 998511), payrolling (SAC 998515), and all other labour supply services under the SAC 9985 group.
Is manpower supply under RCM in GST?
General manpower supply (non-security) is not under RCM by default. RCM under Section 9(3) is notified only for security personnel supply, where a non-body-corporate supplier provides security services to a registered body corporate (effective 1 January 2019 via Notification 29/2018). For general staffing, RCM applies only if the supplier is unregistered and Section 9(4) conditions are met.
What SAC code applies to staffing and recruitment services?
Staffing services fall under the SAC 9985 group. The most commonly used codes are 998513 (contract staffing), 998514 (temporary staffing), 998512 (permanent placement), 998511 (executive search), and 998515 (payrolling). All attract GST at 18%. Use the specific sub-code that matches the nature of your staffing arrangement for accurate invoice classification.
Can ITC be claimed on manpower supply GST?
Yes. Input Tax Credit on GST paid for manpower supply services is fully claimable by the recipient. Manpower supply is not blocked under Section 17(5) of the CGST Act. The standard ITC conditions apply: valid GSTIN, supply reflected in GSTR-2B, and GSTR-3B filed claiming the credit. For RCM cases (security services), the recipient pays GST in cash first and then claims ITC of the same amount.
Is GST applicable on employee deputation vs manpower supply?
Yes, but the treatment differs. Manpower supply is a taxable service at 18% where the staffing agency is the supplier and bills the client the full amount (wages, statutory dues, and margin). Employee secondment or deputation, where an existing employee of one entity is placed with another, may also attract GST, but the taxable value and supply characterization depend on the terms of the secondment agreement and whether a consideration flows between the entities.
What is the TDS rate on manpower supply payments?
TDS on manpower supply payments falls under Section 194C of the Income-tax Act (Section 393 under the new IT Act 2025). The rate is 1% when the payee is an individual or HUF, and 2% for all other payees (companies, firms, LLPs). TDS is computed on the invoice value excluding GST, provided the GST component is shown separately in the invoice.
Sources and verification: This guide is based on the CGST Act, 2017 (Sections 9(3), 9(4), 16, and 17(5)), Notification No. 13/2017-Central Tax (Rate) dated 28 June 2017 as amended by Notification No. 29/2018 (RCM on security services, effective 1 January 2019), and Notification No. 11/2017-Central Tax (Rate) (GST rate of 18% on manpower supply under SAC 9985). The SAC classification follows the Services Accounting Codes published by CBIC. The taxable-value treatment (full billing, not just margin) is consistent with multiple AAR orders and the GST valuation rules under Section 15 of the CGST Act. E-invoicing threshold of Rs 5 crore from April 2026 is per CBIC notification. Income-tax TDS treatment is based on Section 194C of the Income-tax Act, 1961 (Section 393 of the new IT Act 2025), and CBDT Circular No. 23/2017 (TDS on amount excluding GST). The body-corporate definition is from Section 2(11) of the Companies Act, 2013. GST slab structure reflects the position after the 22 September 2025 rate restructuring (0/5/18/40%). All provisions should be verified against www.gst.gov.in and www.incometax.gov.in before applying to specific compliance decisions.
