LABOUR CHARGES ON SERVICE TAX

[Rajeev Khulbe]

GOOD AFTERNOON TO ALL MY GREAT EXPERTS,

SIR CAN YOU PLEASE TELL ME

1 THE MEANS OF PURE LABOUR CONTRACT.

2- IS LABOUR CHARGES / PURE LABOUR CHARGES SERVICE CAME UNDER R.C.M WHERE SERVICE PROVIDER AND SERVICE RECEIVER WILL PAID SERVICE TAX @ 50%(15*50/100 = 7.5%)

[Rajagopalan Ranganathan]

Sir,

Notification No. 30/2012-ST dated 20.6.2012 as amended prescribes the percentage at which service tax is to be paid under RCM. This Notification prescribes at Sl. No. 9 that " in respect of services provided or agreed to be provided by way of supply of manpower for any purpose or security services. According to rule 2 (g) of Service Tax Rules, 1994 "Supply of manpower" means supply of manpower temporarily or otherwise, to another person to work under his superintendence or control. If the service availed by you fits into above definition then you have to pay 100% of service tax payable with effect from 1.4.2015 (vide Notification No. Not. 07/2015 - Dated 1-3-2015 w.e.f. 1st day of April, 2015. Prior to that 25% of the service tax is payable by the service provider and 75% of the service tax is payable by service receiver. Payment of 50% of service tax by service provider and 50% of service tax by service receiver in respect of services provided or agreed to be provided in service portion in execution of works contract (vide Sl. No. 9 of the above referred Notification. Since the service received by you will not fall under services provided or agreed to be provided in service portion in execution of works contract you cannot pay 50% of the service tax liability. This is my view.

[KASTURI SETHI]

Sh.Khulbe Ji,

Pure labour charges cannot be classified under Works Contract Service and hence RCM is not applicable.Full ST is to be paid by the Contractor under respective service i.e. whether Residential, Commercial Construction or Erection Commissioning or installation, Repair etc.

[KASTURI SETHI]

Pure labour means service provided without material. In case service is not provided with material, no eligibility for the benefit under Notification No.24/2012-ST dated 6..6.12 as amended.

[YAGAY andSUN]

Doing a job or work or providing services without involving any material called Pure Labour and Works Contract means Pure labour plus Material involved. Hence, on Pure Labour the provision of Notification No. 30/2012-ST are not applicable. Even VAT is not applicable.

[CSSANJAY MALHOTRA]

Am in agreement with the views shared by Sh. Rajagopalan ji & Sh. Kasturi ji.

[Ganeshan Kalyani]

Sir, I support the views of the experts above.

1) sir, Labour contract means supply of Labour to another to work under his control and supervision. It may be supplying Labour to manufacturer for using them in carrying out manufacturing activity. This would mean Labour contract I.e. supply of labour / ?manpower supply service .

2) Sir, pure Labour charges in carrying out civil work or erection of machinery or doing any Repair work would not qualify to mean works contract service. Works Contract would mean a contract for carrying out, say, construction work of building a wall which would involve both material and service or any work which involves both material and Labour.

Reverse charge is applicable on works contract service if in addition to above conditon the provider is an individual, HUF, Firm and receiver is the company. Valuation is also available. Thanks.

[KASTURI SETHI]

Sh.Khulbe Ji,

I support the views of Sh.Ganeshan Kalyani, Sir as he has detailed additional points which are very crucial to understand the concept of Pure Labour Contract.

[Ganeshan Kalyani]

Sri Kasturi Sir, your acknowledgement and appreciation is a remuneration and encouragement to me to contribute more. Thanks for your words. Thanks.

AI Summary

Pure labor contracts exempt from RCM; full service tax applies. Refer to Notification No. 30/2012-ST for details. A query was raised about the applicability of service tax on pure labor contracts under the reverse charge mechanism (RCM). Experts clarified that pure labor contracts, which involve services provided without materials, do not fall under the works contract service category, and thus RCM is not applicable. Full service tax is to be paid by the contractor for services like residential or commercial construction, installation, or repair. The discussion referenced Notification No. 30/2012-ST and emphasized that pure labor does not include material, distinguishing it from works contracts, which involve both labor and materials.