The Authority for Advance Rulings, Tamil Nadu in the case of M/S. ACCESS HEALTHCARE SERVICES PRIVATE LIMITED vide TN/10/ARA/2024 dated 30.05.2024, has ruled that the applicant can avail the input tax credit on contract staffing services under Section 16 (1) of the CGST Act, 2017, provided they meet the conditions specified in the section.

This ruling is significant for businesses in the service sector, particularly those heavily reliant on human resources, as it clarifies the conditions under which ITC can be claimed for contract staffing services.

Facts of the Case:-  The Applicant, engaged in the IT/ITeS sector, provides Information Technology enabled services, specifically Business Process Outsourcing (BPO) services for clients in the healthcare industry in the USA. The Applicant plans to hire professional contract-staffing firms to manage their human resource needs. Staffing firms will issue tax invoices with applicable GST for their services

Issue:- Whether applicant eligible to claim ITC on GST paid for services availed from professional contract-staffing firms. 

Contention of Applicant:-  The Applicant submitted that they are engaged in activities that are inherently business-oriented. The procurement of contract staffing services is essential for furthering their business operations. They undertake to comply with all conditions under Section 16 (2) of the CGST Act, 2017, which includes possession of a tax invoice, receipt of services, payment of taxes to the government, and filing returns.

Observations of AAR:  The AAR analysed legal provisions of Section 16(1) and Section 17(5), stating that the applicant's use of contract staffing services is in the course or furtherance of their business, satisfying the primary condition for availing ITC. The contract staffing services do not fall under any blocked credit categories, allowing the applicant to claim ITC.

Rulings :-The applicant is eligible to avail ITC on contract staffing services as per Section 16 (1) of the CGST Act, 2017, subject to the fulfillment of the specified conditions. The judgment confirms that the services are crucial for their business operations and are not restricted by any provisions under Section 17 (5).