Manpower recruitment and outsourcing services

By Junaid IqbalUpdated 1 August 20265 min read

CA Finalist, ACCA FinalistEditorial team: Chartered Advisory Team of Chartered Accountants

Quick answer: Manpower supply, recruitment and outsourcing services are taxable services under provincial sales tax, generally at the standard rate, administered by the relevant authority, with Islamabad under FBR. For manpower supply the taxable value is often the full amount charged, including the salaries of the staff supplied, whereas a pure recruitment fee may be taxed on the fee alone — a distinction to confirm with the authority.

Manpower supply, staffing, recruitment and business-process outsourcing are taxable services, and the sector shares security's defining question: is the tax on the whole charge, including the salaries passed through to the client, or only on the agency's fee? The answer shapes the tax on every contract. This guide sets out the treatment and the crucial value distinction.

A taxable provincial service

Manpower supply, recruitment and outsourcing services are taxable services under provincial sales tax, generally at the province's standard rate, administered by the relevant authority — SRB, PRA, KPRA or BRA — with Islamabad under FBR. A manpower or outsourcing firm charges provincial sales tax on its charges and files with the provincial authority. Whether the firm supplies temporary staff, runs an outsourced function, or places permanent hires, its services fall within the provincial net.

The taxable value question

The pivotal issue is the taxable value. Where an agency supplies staff and charges the client for them, the taxable value is often the full amount charged — including the salaries of the supplied staff, not merely the agency's margin. So on a manpower-supply contract, the tax base can be the gross charge, even though much of it is passed through to the workers as wages. This is the same gross-value feature seen in security services, and it substantially affects the tax on a manpower contract: an agency that assumes sales tax applies only to its thin margin, while the large salary pass-through escapes, can badly under-declare. Because the point is significant and the rules vary, an agency should confirm the basis with its authority rather than assume.

Pure recruitment can differ

A pure recruitment service may be treated differently. Where an agency simply finds and places a candidate for a one-off fee — and the candidate is then employed directly by the client — the taxable value may be the recruitment fee alone, because there is no ongoing pass-through of salaries through the agency. This contrasts with manpower supply, where the agency supplies and continues to charge for the staff, and the gross-value question bites. The distinction therefore runs between placing someone (fee-based, potentially taxed on the fee) and supplying people on an ongoing basis (potentially taxed on the gross charge including wages). This resembles the commission-versus-supply distinction in agency arrangements. Which category a particular service falls into should be confirmed with the authority, as it determines the tax base.

Worked illustration. An agency in Sindh supplies a team of staff to a client on an ongoing basis and charges a monthly amount covering their salaries plus a margin. It accounts for provincial sales tax through SRB on the full monthly charge, confirming that the gross-value basis applies. Separately, it places a permanent hire directly with another client for a one-off recruitment fee, and treats that fee as the taxable value, there being no ongoing salary pass-through.

Common mistakes

Charging sales tax only on the agency\'s margin when the gross-value basis applies to manpower supply.
Treating manpower or outsourcing services as outside the provincial net.
Confusing ongoing manpower supply with one-off recruitment for the taxable value.
Overlooking withholding by clients on manpower-service payments.

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Where it fits

Manpower shares its gross-value feature with security services and its supply-versus-fee distinction with agency and commission arrangements. For province detail, see the Sindh (SRB) and Punjab (PRA) overviews. Manpower supply is often taxed on the gross charge; pure recruitment on the fee.

Confirm before you rely on this. Manpower-service rates and the taxable value are set by provincial law and the relevant authorities and change regularly. Confirm the current position from SRB, PRA, KPRA, BRA or FBR, or a qualified tax adviser.

Where the rate actually comes from

Manpower supply and pure recruitment are frequently treated differently, and where the full payroll cost forms part of the taxable value the cash impact is far larger than the percentage suggests. Establish the valuation basis before the rate.

The standard rate is 16 per cent in Punjab and 15 per cent in Sindh, Khyber Pakhtunkhwa and Balochistan, with telecommunication services higher at 19.5 per cent and Islamabad Capital Territory administered by FBR. Sindh has also moved from a positive list to a negative list, so a Sindh service is taxable unless it is specifically exempt — if you concluded some years ago that you were outside the net, that conclusion needs re-testing. The full picture is in the rates by province guide; the authoritative figure for your own category is in the current working tariff published by Punjab Revenue Authority or the authority for your province.

Source check: 14 September 2026. Standard provincial rates and the Sindh negative-list reform are sourced in the rates-by-province guide. The category treatment described above is general orientation and has not been confirmed line by line against any authority's current schedule — read your own entry in the applicable working tariff before invoicing.

Sources

This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.

Questions people also ask

Are manpower and outsourcing services subject to sales tax?

Yes. Manpower supply, recruitment and outsourcing services are taxable services under provincial sales tax, generally at the standard provincial rate, administered by the relevant authority, with Islamabad under FBR. A manpower or outsourcing firm charges provincial sales tax on its charges and files with the provincial authority.

Is sales tax charged on the staff salaries passed through?

For manpower supply, often yes. Where an agency supplies staff and charges the client for them, the taxable value is often the full amount charged — including the salaries of the supplied staff, not just the agency's margin. So the tax base can be the gross charge. This is a significant point that agencies should confirm, because it substantially affects the tax on a manpower contract.

Is pure recruitment taxed differently from manpower supply?

It can be. A pure recruitment service — finding and placing a candidate for a one-off fee, where the candidate is then employed directly by the client — may be taxed on the recruitment fee alone, since there is no ongoing pass-through of salaries. Manpower supply, where the agency supplies and continues to charge for staff, is where the gross-value question arises. The distinction should be confirmed with the authority.

Scope note: General educational information for Pakistan, not a legal opinion or a substitute for advice based on your documents. Law, notifications, portal procedures and individual facts can change the result.

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