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TMI Blog2021 (11) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... salary to be paid against services provided by them - the applicant maintains Register of Wages in Form XVII under rule 78(1) (i) of the Contract Labour (Regulation and Abolition) Central Rules, 1971 in respect of such supply of work-men. The applicant thus engages contract labour towards supply of manpower services as requited by his clients (recipient of services). Rule 33 of the CGST/WBGST Rules, 2017 clearly speaks that one of the conditions that has to be satisfied for exclusion of expenditure or costs from the value of supply which has been incurred by a supplier as a pure agent if the services procured by the service provider, as a pure agent of the recipient of service, from the third party are in addition to the services which he provides on his own account - Admittedly, in the instant case, the applicant first enters into an agreement to his client for supplying of manpower services and subsequently engages different work-men (third party) at the place of business of his clients and thereby supplies manpower services only. It is found that no other services other than manpower services are provided by the applicant to his client. In the instant case, undisputedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the WBGST Act both. 1.2 The applicant is stated to be engaged in supplying manpower services to his clients on daily/ monthly basis for different jobs as required by his clients. 1.3 It is submitted by the applicant that the clients also authorize him to make payment of salary/wages on monthly basis to the manpower provided by him. 1.4 The applicant submits that he raises periodical invoices to his clients indicating salary/ wages payable against the manpower services supplied by him and also indicates the service charges payable to him at the agreed rates in the invoices in a separate manner. 1.5 The applicant submits further that upon receipt of payment from his clients, he disburses the salary/wages to the manpower provided by him. 1.6 The applicant has made this application under sub-section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01: (i) As per the Client Service Agreement, whether the applicant is acting as a pure agent as defined in Explanation to Rule 33 of the CGST Rules, 2017? (ii) Whether the payment of salary/wages by the supplier can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided at Premises Plot No. 1655, Zone-9, KLC, Bantala, South 24 Parganas, Pin-743502 and/or any other premises as and when mutually decided. The service Provider enters into this agreement on clear understanding that the number of employees to be supplied by him will vary frequently because of uncertain and varying quantum of jobs available. In addition to the services of manpower supply being rendered by the contractor, the principal hereby authorizes the Contractor to make payment of salary, wages and all allowances on behalf of the Principal, in the capacity of an agent of the Principal. The payment of salary, wages and allowances made by the Contractor on behalf of the Principal shall be clearly and separately identified in the invoice to be raised by the Contractor. The service charges payable to the contractor shall be separately indicated in the invoices to be raised by the Contractor. Consolidated salary of the manpower and its components and divisions will be fixed by Principal, the recruitment and retrenchment both will be at the decision of the Principal only. Service Provider will prepare the salary bill, based on the attendance and other necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to arbitration of a mutually agreed Arbitrator under the provision of Conciliation and Arbitration Act. The venue of arbitration shall be at Kolkata and Arbitrator s decision shall be final and binding on the both the parties. The contract may be terminated fully or partially by either of the parties with a month notice. 2.6 The applicant, upon furnishing of the aforesaid documents, has contended that he qualifies as a pure agent as defined in Rule 33 of the CGST Rules, 2017. Accordingly, the amount of salary/ wages to be paid by the applicant on behalf of the client is eligible to be excluded from the value of supply. The applicant is liable to pay tax only on the value of service charge received by him from the client for supply of manpower services. 3. Submission of the Revenue The concerned officer from the revenue has expressed his view in writing which is reproduced verbatim as under: 3.1 As per para 8 of the Manpower Supply Agreement , the entire service benefits and obligations pertaining to the work-men hired by the service provider like PF, ESI, Profession Tax shall be borne by the service provider only. Client shall have nothing to do with all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions urged before us, we find it apposite to go through rule 33 of the CGST/ WBGST Rules, 2017 first which reads as under: 33. Value of supply of services in case of pure agent. - Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely :- (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation . - For the purposes of this rule, the expression pure agent means a person who - (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Overtime Register. - (1) (a) Every contractor shall in respect of each work on which he engages contract labour,- (i) maintain a Muster Roll and a Register of Wages in Form XVI and Form XVII respectively: Provided that a combined Register of Wage-cum-Muster Roll in Form XVIII shall be maintained by the contractor where the wage period is a Fortnight or less; (ii) maintain a Register of Deduction for damage or loss, Register of Fines and Register of Advances in Form XX, Form XXI and Form XXII respectively; (iii) maintain a Register of Overtime in Form XXIII recording therein the number of hours of, and wages paid for, overtime work, if any; (b) Every contractor shall, where the wage period is one week or more, issue wage slips in Form XIX, to the workmen at least a day prior to the disbursement of wages; (c) Every contractor shall obtain the signature or thumb impression of the worker concerned against the entries relating to him on the Register of Wages or Muster Roll-cum-Wages Register, as the case may be, and the entries shall be authenticated by the initials of the contractor or his authorised representative and shall also be duly certified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the third party (work-men/employee). 4.8 We are now going to analyse the activities involved in the instant case in the light of illustration given in rule 33 of the CGST/WBGST Rules, 2017. What is most significant in the said illustration that the service provider A , other than his service fee, recovers from the service recipient B an amount towards registration fee and approval fee paid by him to the Registrar of Companies which he has paid for the name of the company i.e, B . Such fees are compulsorily levied on B and therefore also payable by B . Here, A is merely acting as a pure agent in the payment of those fees and for that reason, recovery of such expenses is a disbursement and shall not form a part of the value of supply. 4.9 In the instant case, undisputedly the applicant is the person who is liable to pay salary/wages to the work-men employed by him under Employment Agreement to provide manpower services to his clients and just showing such amount in a separate manner in the invoice doesn t shift his liability on the recipient of services and makes him qualify as a pure agent in terms of rule 33 of the CGST/WBGST Rules, 2017. The contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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