Delhi HC interim stay on recovery of service tax on Security services in respect of components of Salary, PF, Uniform Charges & Bonus
WE are informed by the Advocate concerned:
In case of security agency supplying the security personnel or other manpower, Service Tax Department is demanding service tax on the entire amount, instead of limiting the service tax demand to the extent of service charges. Therefore, in this process, service tax is also being levied and demanded in respect of the amount charged by the security agency in respect of salary payable to such security personnel, as well as the contribution towards ESI, PF, and various other statutory and non- statutory levy such as, professional tax, or amount payable to them in respect of bonus, leave encashment, uniform and other incidental charges.
Skylark Securitas Private Limited has approached to the Honourable Delhi High Court by way of writ petition challenging the levy of service tax on Security agency other than the amount of service charges. The petitioner has urged that in case of manpower supply and security services, service tax is leviable only on the service charges and no service tax is leviable on the amount received from the client on account of salary payable to security guard/staff supplied and their contribution towards various statutory dues such as ESI, PF etc.
The Department has taken a stand that service provider like security agency are required to pay service tax on gross receipts inclusive of salary and statutory contribution like PF and ESI. However, while hearing the above-mentioned matter, the Delhi High Court has passed an interim order on 04th September 2013, directing the Department that while adjudicating the matter, service tax demanded in respect of components of Salary, ESI, PF, Uniform Charges, Bonus, etc. has to be computed separately but restrained the Department for recovery of said service tax from the petitioner providing security services. While passing the order, the High Court has further directed that recovery only can be made in respect of the service tax on service charges (other than above-components) of supply of security personnel/manpower supply and other demands shall be subject to the further orders of the High Court. The High Court has fixed 12th November 2013 for further hearing.