APPLICABILITY OF GST ON PAYMENT OF ACTUAL WAGES THROUGH LABOUR CONTRACTOR

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QUERY REGARDING GST APPLICABILITY ON PAYMENT OF WAGES TO INDIVIDUAL LABOURERS

1. LABOUR CONTRACTOR PROVIDES WORKERS TO A FACTORY FOR MANUFACTURING OF GOODS.
2. HE IS ISSUING THE FOLLOWING MONTHLY BILLS TO THE FACTORY

BILL NO.1 (APRIL 2018)

	Total Mandays	Amount
REIMBURSEMENT OF WAGES (ACTUALS WITH EMPLOYEE WISE DETAILS)	1664	670844
EPF – EMPLOYER CONTRIBUTION (ACTUALS)		39969
ESI - EMPLOYER CONTRIBUTION (ACTUALS)		31866
TOTAL		742679

BILL NO.2 (APRIL 2018)

	Total Working Days	Rate	Amount
CHARGES FOR PROVIDING LABOUR	1636	20	32720

(Total Mandays - Paid Holidays = Total Working Days)

1. WHETHER THE CONTRACTOR IS LIABLE TO CHARGE GST ON BOTH THE BILLS OR WHETHER BILL NO.1 FOR REIMBURSEMENT OF ACTUAL WAGES, EPF AND ESI PAYMENTS WILL BE EXEMPTED FROM THE APPLICABILITY OF GST IN THE LIGHT OF SCHEDULE III (Section-7) –

ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
1. Services by an employee to the employer in the course of or in relation to his employment.

1. WHETHER THE LABOUR CONTRACTOR CAN BE CONSIDERED A PURE AGENT OF THE COMPANY AND REIMBURSEMENT OF ACTUAL WAGES, EPF AND ESI CAN BE CONSIDERED AS EXEMPTED FROM GST.

AI Summary

GST Applies to Entire Payment for Labor Contractor Services, Not Exempt Under Schedule III or Rule 33 CGST Rules 2017. GEE Limited inquired about the applicability of GST on payments made to a labor contractor who provides workers for manufacturing. The contractor issues two types of bills: one for reimbursement of actual wages, EPF, and ESI, and another for labor charges. The query focused on whether GST applies to both bills or if the first bill is exempt under Schedule III, which covers activities not considered supplies. Responses indicated that GST applies to the entire amount, as the contractor does not qualify as a 'pure agent' under Rule 33 of the CGST Rules, 2017. Therefore, GST is chargeable on both bills.