Pure Labour Contract

[ASHISH AGARWAL]

Dear Sir,

One of my client [Corporate Entity] is in realty sector which allots labour contracts [Individuals] for getting the civil, plumbling, electrification, etc work done at it site. I want to know whether the same will be covered in Manpower supply services or its a job work.

Further, if its a job work then the contractor has to charge service tax as it will be covered under forward charge. Under which head he will collect service tax ?

[Rajagopalan Ranganathan]

Sir,

The contract referred by you is to be classified under 'other than negative list service' and is liable to service tax @15% (as on date).

[Ganeshan Kalyani]

Sir, the contracts as mentioned is for multiple job. If a single contractor would have provided all such services then it is bundled service. Otherwise the services shall be classified according to each type of service. The contractors are liable to charge service tax at applicable rate on the invoice under forward charge. Thanks.

[KASTURI SETHI]

I endorse the views of both experts. It is neither manpower supply nor works contract. Pure labour cannot be classified under WCS. NO RCM available. It is under forward charge. Prior to 1.7.12, such type of service was classified under BAS. Old reference just for more clarity.

[ASHISH AGARWAL]

Thanks everyone for the valuable feedback. I have read some articles that when a pure labour contract is awarded to a contractor by a builder constructing residential apartment then as per circular no.96/7/2007 dt.23.08.2007, it will be categorized in Construction of Residential Complex service.In this case the contractor will charge service tax @15% from builder under forward charge. Can anyone tell me in knowing the Point of Taxation in this case ?

[Venkataprasad Pasupuleti]

Completion & finishing works of buildings or complex may be classifiable under Construction of Residential Complex service. However after 01.07.2012 classification is not relevant.

W.r.t. point of taxation is concerned, general rule is applicable i.e. earlier of invoice date or payment. In case invoice is not issued within 30 days from completion of service then completion date shall be substituted in place of invoice date and point of taxation shall determine accordingly.

Hope am clear.

AI Summary

Service tax classification for pure labour contracts: taxable under forward charge with point of taxation based on invoice or payment. Pure labour contracts for on-site construction and finishing works are not manpower supply or works contracts but are taxable as an other than negative list service under forward charge, with contractors required to charge service tax on invoices. Where multiple services are bundled by a single contractor classification may differ; otherwise each service is classified separately. The point of taxation is the earlier of invoice date or payment, and if no invoice is issued within thirty days of completion, the completion date substitutes for the invoice date.