GST on Lockdown Wages for Manpower Services: Kerala Advance Ruling
Payments received for manpower services during a lockdown are taxable under GST even if no physical work was performed.
- Ruling
- ADVANCE RULING No.KER/31/2025 Dated 09.10.2025
- Dated
- 09 Oct 2025
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if lockdown wages from VSSC were exempt from GST.
- The authority ruled these payments are taxable as part of manpower services.
- The contract remained active, making the payments part of the taxable supply.
In short
The Kerala State Ex-service League asked if GST applies to wages received from the Vikram Sarabhai Space Center (VSSC) during the COVID-19 lockdown. Because the government treated these employees as 'on duty' during that time, the authority decided the payments were part of the ongoing service contract rather than a gift or grant.
What has changed
How it worked before
Many businesses assumed that if no actual work was performed due to a lockdown, payments received might be considered non-taxable or exempt.
What has changed
The authority confirmed that if a contract for services remains in force, payments labeled as 'on duty' wages are taxable. This means businesses must pay GST on these amounts, as they are legally viewed as payment for the supply of manpower.
Who this affects
Manpower agencies and service providers who received lockdown-period payments from clients under active contracts.
An example
Imagine a security agency that provided guards to a factory. During the lockdown, the factory paid the agency for the guards' wages even though the factory was closed. The agency should treat these payments as taxable manpower services and pay GST, as the contract was still active.
What you should do
Review your service contracts and payments received during the lockdown. Remember that an Advance Ruling only binds the business that asked and its specific tax office; it is not a law that automatically applies to your business.
If you do nothing
If you assume these payments are exempt and do not pay GST, you risk a tax demand notice from your local officer. You would then be liable for the unpaid tax, interest, and potential penalties for under-reporting your taxable supply.
The terms explained
- Manpower services
- The supply of workers to another business or organization to perform specific tasks under a contract.
- Consideration
- Any payment or value given in return for a service or good provided.
- Taxable supply
- Any sale or service that is subject to GST under the law.
The ruling in detail
Authority for Advance Ruling
M/s. The Kerala State Ex-service League
ADVANCE RULING No.KER/31/2025 Dated 09.10.2025 · Keralam
Questions before the authority
- Whether GST is applicable for the payments like wages/ interim payments received from Vikram Sara Bhai Space Center (VSSC) during lock down period?
- Whether any GST exemption is available for the amount received as wages from VSSC during lock down period?
Facts
The applicant is a charitable society providing manpower services to government departments, including VSSC, on a contract basis. During the COVID-19 lockdown, the applicant's employees were unable to perform duties, but VSSC made interim payments to them as 'on duty' wages per Central Government directives. The applicant seeks to determine if these specific payments are subject to GST despite no actual services being rendered during that period.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of GST on interim payments during lockdown | Yes, GST is applicable Applicable to manpower services provided under the mutual agreement |
| Availability of GST exemption for lockdown wages | No, GST exemption is not available The amount is treated as duty |
The Authority ruled that GST is applicable to the payments received from VSSC as they constitute consideration for manpower services provided under a continuing contract. It further held that no GST exemption is available for these payments, as the period was legally treated as 'on duty' and the payments are considered part of the taxable supply.
Reasoning
The Authority determined that the payments were made under a subsisting contract for manpower services and were not ex-gratia or damages. Relying on Ministry of Finance Office Memorandums, it concluded that the period was legally deemed 'on duty', thereby maintaining the quid-pro-quo nature of the supply. Consequently, the payments form part of the value of taxable supply under Sections 7 and 15 of the CGST Act, 2017. In the absence of any specific exemption under Notification No. 12/2017-CT(R), the full amount is subject to GST.
Provisions relied on
- Section 7 of the CGST Act, 2017
- Section 15 of the CGST Act, 2017
- Section 98(1) of the CGST Act, 2017
- Notification No. 12/2017-CT(R)
- Office Memorandum F.No. 23(4)/E.Coord/2020/I dated 23.03.2020
For the practitioner
This ruling clarifies that **interim payments** made to outsourced staff during a lockdown, when treated as 'on duty' wages by the service recipient, are **taxable as manpower services**. It confirms that the lack of physical service performance does not negate the taxability if the underlying contract remains in force. Practitioners should note that such payments are not considered pure grants or ex-gratia assistance.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/3-the_kerala_ex-service_league.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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