2021 (2) TMI 198 - AAR - GST

Valuation - rate of GST - manpower services only on the services charges or on the total bill amount - GST chargeable @ 18% or not - HELD THAT - The applicant is being paid services charges @2%, in addition to the wages and hence they directed the applicant to charge GST on the service charges only but not on the bill amount. We proceed to examine the valuation of the manpower services. We invite reference to Section 9 of the CGST Act 2017, which is relevant to levy and collection of GST - Section 9(1) of the CGST Act 2017 stipulates that CGST shall be levied on all intra-state supplies of goods or services or both, on the value determined under Section 15. Thus the value of the instant service need to be decided in terms of Section 15. Section 15 of the CGST Act 2017 deals with value of taxable supply and Section 15 (1) stipulates that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration of the supply . In the instant case, the applicant (supplier) and the recipients are not related and the price is the sole consideration. Therefore the value of the taxable supply of manpower services of the applicant shall be the transaction value i.e. the total bill amount inclusive of actual wages of the manpower supplied and the additional 2% amount paid to the applicant.

Summary

Issues: Valuation of manpower services for GST - Whether GST should be charged on service charges only or total bill amount?

Analysis:
1. Admissibility of the application: The applicant, a Private Limited Company, filed an application seeking an advance ruling on the valuation of manpower services. The applicant entered into an agreement with a university and a warehouse corporation for providing manpower supply services. The applicant sought clarification on whether GST should be charged at 18% only on the service charges or on the total bill amount. The application was admitted as it pertained to issues covered under Section 97(2)(c) of the CGST Act 2017.

2. Facts of the Case: The applicant, registered under GST provisions, provided manpower supply services based on customer requirements and awarded contracts. The applicant agreed to comply with labor laws, ensure minimum wages, deposit ESIC/PF contributions, and pay taxes as per applicable laws. The university agreed to pay service charges to the applicant at a rate of 2% in addition to wages, without any deduction from wages.

3. Findings & Discussion: The Authority considered both CGST and KGST Acts, stating that provisions are similar unless specified otherwise. The applicant's submissions and personal hearing were reviewed. The ruling focused on the valuation of manpower services. Section 9(1) of the CGST Act 2017 mandates GST on intra-state supplies based on value determined under Section 15. Section 15 defines the value of taxable supply as the transaction value, being the price actually paid where the supplier and recipient are unrelated and price is the sole consideration.

4. Ruling: The Authority ruled that the value of taxable supply of manpower services is the transaction value equivalent to the total bill amount, inclusive of actual wages of manpower supplied and the additional 2% paid to the applicant. Therefore, GST should be charged on the total bill amount, not just on service charges.