APPLICABILITY OF GST ON PAYMENT OF ACTUAL WAGES THROUGH LABOUR CONTRACTOR

[GEE LIMITED]

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 on manpower supply: entire contract consideration taxable; reimbursements and statutory contributions not excluded as pure agent.
The labour contractor is the supplier and employer for contractual workers; amounts billed for manpower supply-including separately stated wages and employer statutory contributions-constitute taxable consideration. The contractor does not satisfy pure agent criteria because the manpower provision is the primary service and the costs are not merely disbursements in addition to services supplied on the contractor's own account. Accordingly, reimbursements for wages, provident fund and ESI cannot be excluded from the value of supply and GST applies to the gross amount charged.