7.2.4c Service Tax on Outsourced Manpower Services The retail industry is a large user of outsourced manpower services. The service providers involved in providing manpower services to the retail industry have to pay service tax but there is a problem in the assessment of the value of the service transaction. The service is valued not only on the basis of the fee of the service provider but including the salary paid to the employees. The Group considered that the method of valuation of the service of the service provider unfairly increased the burden of taxation on the retail industry. The Group recommended that the service tax in these cases should be limited to the fee element and should not be levied on the gross amount including the salary.
