GST Crackdown on Manpower Providers ₹15 Crore Evasion Detected
The GST department’s crackdown on manpower service providers in Gujarat has revealed a ₹15 crore tax evasion. The department, through rigorous investigations and data analytics, is identifying businesses using fake invoices and evading tax via improper classification or underreporting.
This blog breaks down what happened, why it matters for manpower suppliers and staffing agencies, and how to stay compliant with GST law.
What Triggered the Action?
Based on reports, the Directorate General of GST Intelligence (DGGI), Ahmedabad Zone, uncovered widespread GST fraud through:
- Use of bogus billing by staffing agencies
- Mismatch in GSTR-3B and GSTR-1 filings
- Non-payment of GST collected from clients
- Wrong classification of supply to reduce tax liability
Focus Keyphrase Used: GST crackdown on manpower
What is Manpower Supply under GST?
Under GST law, manpower supply services refer to providing personnel (skilled or unskilled) to another entity for a fee. The key points include:
- HSN Code: 998514
- Tax Rate: 18% GST
- Reverse Charge: Not applicable unless through e-commerce operator under Section 9(5)
As per CBIC Circular No. 177/09/2022-GST, staffing services are taxable at 18%, irrespective of how payment is structured (salary reimbursement or consolidated fee).
Legal Risks for Manpower Agencies
Here’s what manpower service providers need to watch out for:
| Violation | GST Consequence |
|---|---|
| Fake invoice generation | Demand + Penalty under Section 122 |
| GST collected but not paid | Section 76: Recovery with 18% interest |
| Suppression of turnover | 100% penalty under Section 74 |
| Wrong classification of service | Demand with retrospective penalty |
Legal Reference:
- Section 74 – Fraudulent evasion
- Section 122 – Penalty for fake invoices
- Section 76 – Non-payment of collected tax
Expert View: Practical Tips for Staffing Agencies
“Many agencies wrongly assume salary reimbursements are exempt. If you’re controlling the manpower, GST applies. Always issue tax invoices and maintain e-way bill records if value exceeds threshold.”
— Rajiv Joshi, GST Consultant, Ahmedabad
How to Stay GST Compliant: Quick Checklist
✅ Register under GST if turnover > ₹20 lakh (₹10 lakh in NE/Hill states)
✅ Use correct HSN codes (9985 series)
✅ File GSTR-1 and GSTR-3B timely
✅ Match outward and inward supplies
✅ Avoid circular trading or layering invoices
What Does This Mean for Other States?
Gujarat’s manpower GST crackdown is part of a nationwide trend. Similar investigations are underway in Maharashtra, Tamil Nadu, and Karnataka. The CBIC has urged local GST formations to audit manpower billing practices.
Stay alert: Even if your agency operates honestly, mismatched data can trigger notices. Use reconciliation tools to ensure accuracy.
Summary
The GST crackdown on manpower service providers in Gujarat revealed ₹15 crore tax evasion. Agencies used fake invoices and incorrect classifications. Manpower services attract 18% GST under HSN 998514. Businesses must comply with billing, filing, and tax payment rules to avoid heavy penalties.
FAQs
1. Is manpower service under reverse charge?
No, it is taxable under forward charge unless provided through specific e-commerce platforms.
2. Can salary reimbursement be GST-exempt?
Only if there’s no control or supervision by the provider. Otherwise, GST applies.
3. What is the GST rate for manpower supply?
18% as per Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017.
Need Help with GST Compliance?
Efiletax offers expert support for GST filing, manpower service classification, and legal representation in case of departmental audits.