Staffing federation seeks cut in GST on employment services to 5%
The Indian Staffing Federation has urged the GST Council to reduce GST on employment services from 18% to 5%, saying the levy raises workforce costs for MSMEs and consumer-facing businesses, curbs formal temporary hiring and slows payroll formalisation.
What happened
Indian Staffing Federation urges the GST Council to cut employment-services GST from 18% to 5%, arguing the levy raises costs for MSMEs and consumer-facing
Key facts
- 18% GST on employment services
- 5% proposed GST rate for employment services
- ₹20,000-30,000 crore annual business-liquidity impact
- 10-15% potential reduction in formal temporary hiring this fiscal
- 1.83 million formal flexi workers employed by ISF members as of June 2025
What changed
Indian Staffing Federation urges the GST Council to cut employment-services GST from 18% to 5%, arguing the levy raises costs for MSMEs and consumer-facing businesses, constrains formal hiring, and undermines payroll formalisation and social-security coverage.
Why this matters
A GST cut on employment services to 5% could lower contingent-labor costs for consumer-facing businesses and make formal flexi-staffing more viable.
What to watch
- GST Council agenda, fitment committee recommendations or Finance Ministry comments on employment-service taxation.
- Union Budget, GST Council meeting communiques, or state finance minister statements referencing labour-intensive services or MSME GST relief.
- Support from retailer, logistics, hospitality, manufacturing and MSME associations beyond the staffing federation.
- Changes in GST collections or fiscal-revenue forecasts that affect willingness to reduce the 18% rate.
- Data showing growth in informal labour contracting, declining flexi-hiring, delayed input-tax-credit refunds or rising staffing-service costs.