India – Staffing industry seeks to resolve tax anomalies in Budget

By memberservices@staffingindustry.com (Danny Romero)

The Indian staffing industry wants Finance Minister Arun Jaitley to use the Budget route to resolve the tax anomalies it faces, reports the Business Standard.

The Indian Staffing Federation has stated that its demand assumes significance since it is the formal sector which will grow post-demonetisation and the staffing industry will play a crucial role in that

The Indian Staffing Federation said tax deducted at source (TDS) is imposed on the gross invoices received by its members from its client companies, whereas it should be on just the commission received by the staffing companies.

“While this amount is adjusted later, it takes about a year to happen, creating cash flow problems for staffing companies,” Suchita Dutta, executive director of the Indian Staffing Federation, said.

At the same time, the Federation said its members topped the list of India staffing firms, as per the recent report published by Staffing Industry Analysts.

The Federation also demanded that TDS be lowered to 2% against the 10% imposed currently. The services industry draws 10% TDS, while the manpower industry is imposed a 2% tax, Dutta said. However, Dutta said that contract workers have not been mentioned in the manpower industry, forcing industry players to deduct 10% TDS.

The Federation has also demanded separate regulations for the contract industry.

“Currently, they have to run around to seek separate licenses for their agreement with companies based on specific areas,” Dutta said. “For instance, Wipro has six offices in Delhi and for each, the IT company and the staffing firm will have to seek separate licenses from the area licensing officer.”

Dutta also stated that demonetisation will propel some desirable changes, such as bringing the informal workers into the fold of the formal workforce as 94% of India’s workforce is in the informal sector, and its income does not even get properly accounted.

“In the medium to long term, employers engaging casual workers will be compelled to make payments to them only through banking or other formal modes. And this effect could become visible in sectors like real estate, construction and infrastructure, where a lot of work currently gets done in cash,” Dutta said. “Though formalisation is set to increase post demonetisation, the government needs to look at ways to efficiently manage formal workers, ensuring social benefits and encouraging staffing players to operate in formal sector.”

Source:: India – Staffing industry seeks to resolve tax anomalies in Budget