Reverse charge on manpower supply

[Raj Malik]

Our company has hired an employee through a recruitment agency on which he has not charged any service tax. Whether reverse charge would be applicable or not.

[KASTURI SETHI]

Yes. 100 % ST is to be paid by Service Receiver Company.

[Rajagopalan Ranganathan]

Sir,

As per Sl. No. 8 of Notification No. 30/2012-ST dated 20.6.2012 as amended "in respect of services provided or agreed to be provided by way of supply of manpower for any purpose or security services" 100% service tax is payable by receiver of the service. Hence you are liable to pay service tax under reverse charge mechanism.

[Raj Malik]

My colleague is saying that reverse charge will not be applicable since employee is hired on full time basis and also he is under our control & we have not hired him on contractual basis. So service charge laibility would be applicable or not.

[KASTURI SETHI]

It is crystal clear from your query that hired person is under supervision and control of the Company. Hence taxable. Can you prove by virtue of any agreement/contract that hired employee is not under supervision and control of Co. ?

[Raj Malik]

yes, employee is under the supervision & control of company. would reverse charge be applicable

[KASTURI SETHI]

It is the mission of TMI and experts to convince querists and save them from rigours of litigation and heaving expenses thereof. It is yeoman's service by TMI in this materialistic world. It is rare.

[DR.MARIAPPAN GOVINDARAJAN]

It amounts to manpower supply despite the fact that they are under your supervision. Further they are not your employees.

[Pankaj Sarkar]

Please comments:

Work Order is issued to Supplier ( Individual) for construction of Building without Material through Work Order . Total Invoice value ₹ 920655.00. My Query.

1. Is it Pure Labour contract ????

2. He has not claimed Service tax.

3. Is there any abatement?

4. RCM is applicable or not?

5. Whether company is liable to pay S Tax ( 920655*15%) ₹ 138098.00. Or basis on RCM??.

6. If Value came to ₹ 1200000.00, what will be the treatment of s tax.

7. If possible please show the calculation in both cases.

Thanks In advance

Pankaj

[Nash Industries I Pvt Ltd]

Dear Mr Raj- Service Tax is applicable on manpower on reverse charge mechanism as other experts have opined.

Regards,

S.Ramaswamy

[Nash Industries I Pvt Ltd]

Dear Mr Pankaj,

Here the contract is for the construction of building and not for manpower. Further, the contractor may not be a person providing the services of manpower supply. It falls under the category of construction services and the service provider is liable for service tax.

However, more details are required to suggest/opine.

Regards

S.Ramaswamy

[KASTURI SETHI]

Agreed with Sh.S.Ramaswamy, Sir. Further query-wise reply is as under:-

1. Yes.

2. Wrong.

3.No

4.No.

5.No, being pure labour and pure labour cannot be classified under WCS.

6. ST on labour charges

[Pankaj Sarkar]

Dear Sirs,

We know that in case of Pure labour ,RCM will not atract, then what will be the tax treat for service receiver ( Individual):

i. If Service provider do not have the service tax registration and not claimed in Bill also. Whether service tax is required to pay at all to the department?? If required then full 15% will be paid to department, is it correct ??

ii. If service receiver have the registration and claimed , how much is to paid to him??

Thanks in advance

Pankaj

[Rajagopalan Ranganathan]

Sir,

If the service provider has no service tax registration and he did not charge service tax on you, the reason being that his total turnover during previous financial year is less than 9 lakhs and he will not take a registration. if the service provided by the service provider is not covered by Notification No. 30 of 2012-ST dated 20.6.2012 as amended then service receiver is not liable to pay the service tax under reverse charge mechanism.

AI Summary

Reverse charge on manpower supply makes the service recipient liable to pay tax when personnel are supplied rather than employed. Reverse charge applies to services by way of manpower supply, making the service recipient liable to pay service tax under the reverse charge mechanism where the arrangement constitutes supply of manpower and the supplied persons are not the recipient's employees. Pure labour contracts in construction are generally treated as construction services with the provider liable for tax and do not attract reverse charge. Supplier registration status does not negate recipient liability where the supply falls within the manpower supply notification.