Indian Staffing Federation demands abolition of 18% GST

ISF demands `Merit Services’ status for flexi-staffing under 5% GST

Published - May 14, 2020 10:35 pm IST - Bengaluru

The Indian Staffing Federation (ISF), the apex body of temporary workers industry in the country, has demanded the Union government to categorise its services as ‘Merit Services’’ and therefore reduce the GST on such services to 5% from 18% currently with immediate effect.

The government needs to consider staffing industry services as a value addition to economic growth and societal development as the sector is directly and actively involved in the `inclusion’ of large number of workforce under the `formal and organised’ employment market with meaningful wages, social security and continuity of livelihood, as per ISF.

Lohit Bhatia, president, Indian Staffing Federation, told The Hindu that, “The contract staffing companies currently pay an 18% GST which could be as high as eight times the cost of service fee. It may also be important to note here that the Gross Margin (revenue less salaries paid to temporary staff) for almost all of contract staffing companies vary between 2% to 8% and the net margins are significantly lower than that.’’

On an average, a temporary employee’s compensation of ₹18,000 per month attracts service fees of 4% i.e ₹720 plus the GST will be ₹3,370 per person per month, which is 4.68 months of gross earnings per person per month deployed by the staffing company. Furthermore, while the service rendered is only worth say ₹720, the GST earned is over ₹3,370 that’s 468% tax earning for the government over service rendered, Mr. Bhatia explained.

“What we do is employment generation for frontline workforce in India. A large population of people find their first formal job through staffing firms. So it is important that the government realise our contribution and consider us as Merit Services and levy us only 5% GST rather than 18%. Staffing firms are currently under pressure to deposit a heavy and it is leading to severe cash crunch and working capital issues for the sector,’’ he added.

On behalf of the Organised Contract Staffing Industry, ISF has recently submitted a representation to the Finance Ministry requesting for an urgent cut in GST and inclusion under Merit Services.

“We are now taking up the matter with Central and States GST councils. We feel especially after COVID-9, all State governments will realise the importance of formal jobs over gig careers or daily wage engagements,’’ Mr. Bhatia anticipated.

At present, around four million contract workers are employed in the country with organised temporary staffing firms who are responsible for the timely payout of salaries/wages and social security/medical insurance.

“The staffing industry is a central pillar in terms of manpower sourcing and supply for industries across domains. With the pandemic, its role has become all the more critical,’’ he further added.

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