Call for Lower GST on Employment Services

The Indian Staffing Federation (ISF) has urged the finance ministry to consider reducing the Goods and Services Tax (GST) rate on employment services from the current 18% to a more favorable 5%. This proposal aims to stimulate formal job creation and enhance competitiveness across vital sectors.

Potential Impact on Formal Job Creation

According to ISF, a reduction in GST could significantly increase the workforce to 15-20 million within a few years, formalizing more jobs and aligning with national employment objectives. The federation highlights the current perception of employment services as an 'additional cost' in sectors with GST rates between 5-18%, such as healthcare, retail, and e-commerce.

Minimal Fiscal Impact, Maximum Benefits

ISF argues that the proposed GST cut would have a negligible fiscal impact, given that employment services contribute only about 0.15% to total GST collections. The move is expected to promote formalization, increase social security coverage, and expand the income tax base, benefiting both the government and the workforce.

Aligning with National Employment Goals

This initiative comes at a critical time when India's job market faces challenges of high informal employment and a demand for skilled labor. A lower GST rate could bridge this gap, supporting the government's employment generation agenda and fostering sectoral growth.