Will attract service tax under RCM on Bonus paid to Contractor.

[Guest]

Dear Sir,

We are a manufacturer and we avail labor service from various labor contractor so in Diwali labor cpntractor claim the bonus for the financial year 2014-2015. My query is that is this transaction attract the service taxliability under Reverse Charge Mechanism as these labor contractors are proprietor. If yes then how much % Because this bous related to 2014-15 and that time the service tax was (12.3%) and liable by service receiver on 75% . But at present the service tax % is 14% and liable by service receiver on 100%.

On above transaction which provision will attract.

Regards

Swapneswar Muduli

[Ganeshan Kalyani]

The bonus paid to the contractor will be considered under Manpower supply service and thereby falls under reverse charge. The service tax @ 14% will be applicable.

[Mahir S]

Yes sir, the views expressed above are correct.

AI Summary

Reverse charge on manpower supply: bonus paid to contractor attracts service tax and is payable by the service receiver. Bonus paid to a contractor is treated as consideration for Manpower supply service and therefore attracts service tax under the Reverse Charge Mechanism, with the service receiver required to account for tax at the prevailing rate applicable to manpower supply at the time of payment.