Manpower Supply HSN Codes: A Guide for Indian Businesses
Manpower Supply HSN Codes: A Guide for Indian Businesses
Identify SAC codes for staffing and security services, navigate Reverse Charge Mechanism (RCM) compliance, and record RCM entries in Tally.
Who is this for: GST & Indirect Tax
Indian businesses often engage staffing agencies to supply security personnel, temporary workers, or recruitment services. Under the GST framework, these services must be invoiced using the correct Services Accounting Code (SAC).
Selecting the correct code and understanding GST Reverse Charge Mechanism (RCM) applicability is essential to maintain compliance.
1. HSN and SAC: Cracking the GST Code Alphabet
While HSN codes apply to tangible goods, service activities are categorized under SAC (Services Accounting Codes). Staffing, recruitment, and security provisions are classified as administrative support services u/s SAC Chapter 9985.
2. The Manpower Supply Code: What You Need to Know
The SAC system uses specific codes to distinguish staffing and recruitment services:
| SAC Code | Service Description | Standard GST Rate |
|---|---|---|
| 998511 | Executive search and recruitment services | 18% (Forward Charge) |
| 998512 | Office support and administrative staffing services | 18% (Forward Charge) |
| 998513 | Temporary staffing and general manpower supply services | 18% (Forward Charge) |
| 998525 | Security personnel and guard services | 18% (Subject to RCM under notifications) |
3. Special Circumstances and Exceptions (GST RCM Rules)
A critical rule under GST is the Reverse Charge Mechanism (RCM) on security services. If security manpower (SAC 998525) is provided by a partnership firm, proprietary concern, or individual to a registered business, the supplier does not charge GST on their invoice.
Instead, the **registered buyer is liable to deposit the 18% GST** directly to the government under RCM, claiming the corresponding Input Tax Credit (ITC) in the same month. If the supplier is a corporate entity (Private Limited company), the transaction remains under Forward Charge (the company charges 18% GST).
4. Case Study: Billing for Security Services under RCM
A registered manufacturing company receives a billing statement from a proprietary security agency for guard services:
- Manpower Service Cost: ₹1,00,000
- Supplier Type: Sole Proprietorship concern
- SAC Code: 998525 (Security services)
- Invoiced GST: Nil (marked as subject to RCM u/s GST notifications)
- RCM Liability (18% paid by Buyer): **₹18,00,0** (₹9,000 CGST + ₹9,000 SGST) paid via bank challan. The company then claims ₹18,000 as Input Tax Credit.
Entry 1: Booking RCM Bill (F9 Purchase Voucher) Debit: Security Service Expense Ledger ₹1,00,000 Credit: Security Agency Payable Account ₹1,00,000 Entry 2: Raising RCM Tax Liability (F7 Journal Voucher) Debit: GST RCM Input Tax Credit Ledger ₹18,000 Credit: CGST RCM Liability Ledger ₹9,000 Credit: SGST RCM Liability Ledger ₹9,000
5. Why Choosing the Right Code Matters
Using an incorrect SAC code can result in audit complications. For instance, if general manpower supply (SAC 998513) is misclassified as security services (SAC 998525), the buyer may pay GST under RCM, while the supplier fails to deposit it.
This mismatch is detected in GSTR-2B audits, leading to GST notices (Form ASMT-10) requesting explanation and interest penalties.
6. Configuring RCM ledgers in Tally Prime
To set up RCM purchases in Tally:
Tally Purchase Ledger:
Create **Security Expense** under **Direct/Indirect Expenses**. Set **Is GST Applicable** to **Applicable** and choose **Set/Alter GST Details**.
Select the nature of transaction as **Purchase Taxable**, enter SAC **998525**, and set **Is Reverse Charge Applicable** to **Yes**. When recording purchase vouchers (F9), Tally will track this as an RCM liability.
Tax Lawyer & GST Compliance Expert