Staffing firms call for cutting GST rate to 5%

New Delhi: Staffing firms have made a pitch for reducing the goods and services tax (GST) on employment services to 5% from 18% now and sought industry status for their sector.

The Indian Staffing Federation (ISF) met top officials of the department for promotion of industry and internal trade (DPIIT) to discuss issues faced by the sector and to press for these demands.

The ISF has said services towards employment must be considered under merit services, arguing that they operated on low margins. It pointed out that gross margin for almost all contract staffing companies varied between 2% and 8% and the net margins were significantly lower than that.


"If the government could consider the request for such service to be put at a lower slab of 5% under the GST regime, staffing companies could facilitate organized employment for more industries,” it said.

ISF is of the view that, just like goods, even services must have categories and there should be differential slabs representative of their impact on human lives.

“The current categorization at 18% slab, which is next to the luxury goods category of 28%, is a deterrent to the growth of employment,” it said, adding this will help principal employers to divert the additional cash flow to deploy towards reimbursement of salaries and payment of statutory contributions, in this immediate time of need.

The ISF said staffing industry, or employment services, should be recognised as a separate industry as this will help driving various support for the sector as the industry was a vital link between employers and job seekers, and driving formal employment.

“This may provide separate banking support, a separate tax deduction at source code, and recognition as employers to staffing companies,” it said.

“The staffing industry is heavily used for crediting all costs of compliances prior to receiving the funds from companies, thus, the TDS applicable on such industry is a huge cost, thus keeping most companies away from ethical services,” it added.

According to ISF, there are 6.23 million organized contract staff in India employed through organised contract or temporary staffing companies.