labour cess @1% impact on service tax

[ramkishore gupta]

I wolud like to know that Labour cess deducted by Govt authority @1% on contract work bill will be included or excluded from computation of service tax amount.

For eg if my total bill is 15,05,714.00 vat charged is ₹ 75282 and labour cess @1% is ₹ 15057.00

While computing service tax amt labour cess will be excluded or included????

[KASTURI SETHI]

It is not the intention of Govt. to levy Service Tax on tax, cess or duty because it cannot be treated as part of consideration. You do not keep cess in your pocket. You collect cess and deposit with the concerned Govt. Otherwise also tax on tax is never charged cess is also a kind of duty or tax.

[Ganeshan Kalyani]

The service tax is applicable on the consideration received for the services rendered. The labour cess is not a consideration. Hence not to be considered for payment of service tax.

[KASTURI SETHI]

I agree with Sh. Kalyani Ji, an expert.

[KASTURI SETHI]

Is labour Cess part of TDS ? If so, situation will be different. Sh.Ganeshan Kalyani, Sir can throw light on this whether labour cess is part of TDS or not.

[Ganeshan Kalyani]

Labour Cess is not to be considered for deducting TDS.

[YAGAY and SUN]

Labour cess is paid on the Gross Value of the Contract and also the service tax shall be levied either on the gross value of the contract net of abatement if any. For levying service tax, the Labour Cess shall not be considered. if service tax is shown separately then TDS under Income Tax shall not deducted on the amount of Service Tax.

[Ganeshan Kalyani]

I agree with the views of the experts. Thanks.

AI Summary

Labour cess exclusion from taxable consideration: cess paid to government is not subject to service tax.
Labour cess collected and remitted to government is not consideration for services and therefore is excluded from the service tax base; service tax is charged on the gross contract value net of abatement but not on statutory cess. Labour cess is likewise not part of amounts for TDS deduction, and separately shown service tax should not attract TDS.