Manpower Supply: GST, TDS and Compliant Invoicing

If you run a staffing or manpower firm in India, three tax and compliance layers ride on every deployment: GST on the supply, TDS your client deducts on the payment, and the contract-labour licence plus statutory costs behind the workers you place. This page states each rule, the numbers where the pack fixes them, and the governing provision, and it flags every figure that varies by state so you verify it before you quote. It is written for staffing-firm owners and treats the illustrative Rs 10,00,000 invoice as the worked case that ties GST, reverse charge and 194C together.

How manpower supply is taxed: 18% GST on SAC 9985

Supply of manpower or staffing services is a taxable supply of service under GST, classified under SAC 9985 and taxed at 18%. The tax is charged on the full taxable value of the supply, that is the total amount you bill (wages, your service charge and every other component of the consideration), not only on your agency margin. For an intra-state supply the 18% splits into CGST at 9% plus SGST at 9%; for an inter-state supply it is IGST at 18%. The recipient can claim input tax credit on this GST subject to the conditions in Section 16 of the CGST Act, and reconciles that credit through GSTR-2B.

Reverse charge: security services vs general manpower

By default, general manpower supply is not under the reverse charge mechanism: you, the supplier, charge GST on your invoice, collect it and deposit it. Reverse charge applies to supply of security services (supply of security personnel), and only in a specific situation: under Notification 13/2017-Central Tax (Rate), as amended by Notification 29/2018 and effective 01 January 2019, the recipient pays the GST when the supplier is a non-body-corporate (for example a proprietorship or partnership firm) and the recipient is a registered person. If your security agency is a body corporate (for example a private limited company), reverse charge does not apply and you charge GST normally. General manpower supply, even by a non-body-corporate, is not brought under reverse charge by this notification.

TDS under Section 194C on the payment

When your client pays you for supply of labour, the client deducts tax at source under Section 194C of the Income-tax Act. The rate is 1% where the payee is an individual or HUF and 2% in every other case (for example a company or a firm), subject to the monetary thresholds in Section 194C. The client deposits the TDS against your PAN and it reflects in your Form 26AS, which you use to claim credit when you file your return. Whether the GST component shown on the invoice is excluded from the amount on which TDS is computed depends on how GST is presented on the invoice and the current CBDT position, so confirm that before finalising the deduction base.

What a compliant tax invoice must carry

A compliant tax invoice for manpower supply carries: the GSTIN of both supplier and recipient; the invoice number and date; a description of the service with SAC 9985; the billing period; the taxable value; and the tax split, being CGST plus SGST for an intra-state supply or IGST for an inter-state supply, at 18%. Because GST is on the full value, show the complete taxable value, not only your margin. The recipient reconciles the input tax credit through GSTR-2B and the TDS through Form 26AS, so accuracy on GSTIN, SAC, value and period is what actually lets your client claim credit.

The licence you need: contract labour under the OSH Code 2020

Contract labour is now governed by the Occupational Safety, Health and Working Conditions Code, 2020, Chapter XI (the CLRA 1970 and BOCW 1996 have been subsumed into this Code). Under section 47, a manpower supply contractor to whom this Part applies must not supply or engage contract labour except under a licence from the designated authority; under section 48 that licence is valid for five years. A contractor needs a separate licence for each principal employer. The legacy forms carried into the rules are Form I (principal employer registration), Form IV (contractor licence application), Form V (certificate by the principal employer) and Form VI (the licence itself), but confirm the exact form numbers against your state's notified rules. On applicability, under the earlier CLRA the threshold was 20 or more contract workmen; under the OSH Code the thresholds are set by the Code and rules and have been widely reported as raised to 50 workers, with state thresholds varying, so treat the number as something to check against your state's notified rule. Note also section 49 (you cannot charge any fee or commission to the workers) and section 57 (contract labour in the core activities of an establishment is prohibited except in the situations that section allows).

Statutory costs to build into your bill rate

Your bill rate has to cover statutory costs, or you carry the shortfall. Wages: under the Code on Wages 2019 you must pay at least the minimum rate fixed by the appropriate government (section 5), which cannot be below the floor wage the Central Government may fix (section 9); you set a wage period not exceeding one month (section 16) and pay within the time limits for that wage period (section 17). EPF: employee 12% of wages and employer 12% (of which 8.33% goes to EPS subject to the pension wage ceiling and the balance to EPF), plus the employer's administrative and EDLI charges; each member has a portable UAN and you file the monthly ECR and deposit contributions. ESI: employee 0.75% and employer 3.25%, with the ESI wage ceiling at Rs 21,000 per month (Rs 25,000 for a person with disability). Bonus: under the Code on Wages, minimum 8.33% and maximum 20% of wages, with eligibility and ceilings as notified. Gratuity: 15 days wages for each completed year (the 15/26 factor) after five years of continuous service, while fixed-term employees get pro-rata gratuity without the five-year condition. Paid leave: under the OSH Code a worker earns one day of annual leave with wages for every twenty days worked, so cost paid leave in as well. Verify the current EPF and ESI rates and ceilings, and the applicable minimum or floor wage, before you quote.

Security agencies and other registrations (PSARA, PT, S and E)

If you supply security personnel, you additionally need a licence under the Private Security Agencies (Regulation) Act, 2005 (PSARA) from the State Controlling Authority, with a separate licence for each state and guards meeting the training and verification requirements; fees and validity vary by state, so confirm with the State Controlling Authority. Beyond the contract-labour licence, a manpower or staffing agency also typically holds: Professional Tax registration and periodic payment where the state levies it; Shops and Establishment registration for its own office under the state law; and GST registration once turnover crosses the threshold. The slabs, thresholds and forms for these vary by state, so confirm each against the state's rule. Where you deploy gig or platform workers, the Code on Social Security 2020 provides for social security schemes that may be funded by aggregator contributions at a notified rate credited to a social security fund; the exact rate and scheme are as notified.

Principal-employer backstop and your liability

The principal employer is not fully insulated when you fail. Under OSH Code Chapter XI, if the contractor does not pay wages to the contract labour, the principal employer is liable to pay the wages in full or the unpaid balance and can then recover that amount from the contractor, including by deduction from sums payable to the contractor or from the licence security deposit (section 55). The principal employer must also provide the welfare facilities to the contract labour it engages (section 53), and engaging contract labour through a contractor who was required to hold a licence but did not is itself a contravention of the Code (section 54). The same recover-on-default logic is well established for PF and ESI where the contractor defaults. In practice this means your client will police your compliance, so keeping your licence, wage records, EPF ECR and ESI current is what keeps you engaged.

Last verified, disclaimer and review status

Last verified: 20 September 2026. Context: the labour codes came into force on 21 November 2025 and the Central Rules were notified on 8 May 2026; state rules and thresholds continue to be notified, so verify the position in your state. This page is general information on manpower supply GST, TDS and compliant invoicing, not tax or legal advice, and it does not create a professional relationship; confirm every figure that varies by state or that is set as notified against the current official source and take advice on your specific facts. Review status: pending named legal review.

Illustrative example: a Rs 10,00,000 staffing invoice

Illustrative example only. ABC Manpower Pvt Ltd bills a client a service value of Rs 10,00,000 for supplying general manpower for one month.

GST (SAC 9985, 18%): charged on the full Rs 10,00,000, not just the margin. Intra-state: CGST 9% = Rs 90,000 plus SGST 9% = Rs 90,000, total GST Rs 1,80,000. Inter-state instead: IGST 18% = Rs 1,80,000. Invoice total = Rs 11,80,000.

Reverse charge: this is general manpower supply, so RCM does not apply. ABC charges, collects and deposits the Rs 1,80,000 GST. Contrast: if this were supply of security services and the agency were a non-body-corporate supplying a registered recipient, RCM would apply, ABC would not charge GST, and the client would pay the Rs 1,80,000 directly under reverse charge (Notification 13/2017 as amended by 29/2018, effective 01 January 2019). Because ABC is a private limited company (a body corporate), RCM would not apply even for security services.

TDS (Section 194C): on payment for supply of labour, the client deducts TDS. ABC is a company, so the rate is 2% = Rs 20,000 on the Rs 10,00,000 service value (it would be 1% = Rs 10,000 if ABC were an individual or HUF), subject to the Section 194C thresholds. Whether the GST component is excluded from the TDS base depends on how GST is shown on the invoice and the current CBDT position, so verify that.

Net settlement: the client pays Rs 11,80,000 less Rs 20,000 TDS = Rs 11,60,000 to ABC and remits Rs 20,000 as TDS (reflected in ABC's Form 26AS). ABC deposits the Rs 1,80,000 GST it collected. The client claims input tax credit via GSTR-2B, subject to Section 16 conditions.

Employer checklist

• Hold a valid contract-labour licence under OSH Code Chapter XI section 47, with a separate licence for each principal employer; check the applicability threshold against your state's notified rule
• Register for GST and charge 18% under SAC 9985 on the full billed value; issue tax invoices carrying both GSTINs, SAC 9985, the billing period, taxable value and the CGST plus SGST or IGST split
• For security services, check whether reverse charge shifts GST to the client (non-body-corporate supplier to a registered recipient) before you charge GST
• Pay at least the applicable minimum or floor wage, set a wage period not exceeding one month, and pay within the section 17 timelines through bank transfer or electronic mode
• Deposit EPF (file the monthly ECR, ensure each worker has a UAN) and ESI contributions, and keep them current
• Cost EPF, ESI, bonus, gratuity and paid leave into your bill rate so statutory dues are covered
• Do not charge any fee or commission to the workers (OSH Code section 49)
• If you supply security personnel, hold a PSARA licence for each state; also maintain Professional Tax and Shops and Establishment registrations as applicable
• Keep wage records, EPF and ESI proof ready, since the principal employer can be made to pay on your default and recover from you, including from your licence security deposit

For the worker

• The contract labour you supply are entitled to wages not below the applicable minimum, paid within the statutory timelines, through bank transfer or electronic mode
• No fee or commission may be charged to them for the job (OSH Code section 49)
• They accrue annual leave with wages at one day for every twenty days worked, and are covered by EPF and ESI where applicable
• If you fail to pay, the principal employer is liable to pay their wages and recovers the amount from you
• They can demand an experience certificate for the work performed (OSH Code section 56)

Common questions

Check these for your state

These items are set state by state. Confirm each against your state's current notified rule before you rely on it.

• Contract-labour licence applicability threshold under the OSH Code 2020: verify against the relevant state's notified rule (reported as raised to 50 workers, state thresholds vary)
• Exact form numbers for principal-employer registration and contractor licence (Form I, IV, V, VI legacy): confirm against the state's notified rules under the OSH Code
• Current EPF and ESI contribution rates, administrative and EDLI charges, and the ESI wage ceiling: verify current rates before relying
• Bonus eligibility and ceilings, and gratuity computation specifics: verify as notified under the Code on Wages and Code on Social Security
• Professional Tax, and Shops and Establishment registration slabs, thresholds and forms: verify against each state's notified rule
• PSARA licence fees and validity: vary by state, verify with the State Controlling Authority
• Applicable minimum wage and floor wage amounts: verify the current notification for the relevant state and scheduled employment
• Section 194C monetary thresholds, and whether the GST component is excluded from the TDS base: verify against the current Income-tax Act thresholds and CBDT position
• Gig and platform worker aggregator contribution rate and scheme: as per the notified scheme, verify
• State rule notification status under the labour codes (codes in force 21 November 2025, Central Rules 8 May 2026): verify the state's position