Query regarding applicability of Reverse Charge on certain expenses incurred by Company

[manisha motwani]

We are stuck in a problem while deciding whether the following service received by a company falls within the scope of Reverse Charge Mechanism.

Dear Sir, A Manufacturing Company and is engaged in the manufacturing of Iodised Salt. The company employs various contractors for payment of certain expenses. The payment is made on per piece basis.

For the following Expenses payment is made to contractors on per piece basis-

Packing Expenses, Stacking Expenses and Loading Expenses.

The contractor employees his own employees which work under his supervision. No material is used by contractor for performing such work. It is purely a labour contract.

Kindly clarify whether the contracts falls under “Works Contract” or “Supply of Manpower” . However, if not, does any liability arise on company for payment of service tax under reverse charge and under what basis and upto what extent.

Please provide your valuable guidance.

AI Summary

Reverse charge liability on contractors' packing, stacking and loading services absent when workers are supervised by contractor, provider liable.
Payments to contractors for packing, stacking and loading that involve the contractor's own employees working under the contractor's supervision with no materials supplied do not constitute a works contract and, absent recipient control over the workers, do not amount to supply of manpower triggering reverse charge; service tax liability remains on the contractor as service provider.