Service Tax on Pure labour without any contractor.

[ALOK SHARMA]

Sir,

Whether Service tax attracts on pure labour (daily wages labour) which is hired without any contractor.

kindly reply in detail.

[ALOK SHARMA]

All members are request to give their opinion. Specially Kasturi Sethi Sir, please reply

[YAGAY andSUN]

In our view it is payable since the definition of manpower supply had been amended on this matter long back.

[ALOK SHARMA]

Any reference which clear the doubts on this issue, please give.

[KASTURI SETHI]

Dear Querist,

We are talking of pre-GST era. For leviability of Service Tax, there were three parameters and these were as follows:

(i) There must be a taxable Service Provider.

(ii) There must be a service receiver.

(iii) There must be consideration. (may be in some guise. That also falls in the definition of 'consideration'.

As per query, pure labour has been hired. Who has hired the labour is liable to pay ST ? You may not call him a 'contractor'. Since the activity (pure labour), conforms to all the above parameters, it is liable to ST. we are not to go by the nomenclature of 'contractor'.

I also welcome the views of other experts on this issue.

[YAGAY andSUN]

Rule 2(g) of Service Tax Rules, 1994 defines: Supply of manpower temorarily or otherwise to another per to under under his superintendence of control.

[ALOK SHARMA]

Sir,

In my query, it's clear that contractor has not hired labour through any contract, he has hired labour directly on daily wages worker without any contractor. So I don't think it will under the manpower supply proviso.

[KASTURI SETHI]

The fact can be ascertained from the examination of statutory as well as non-statutory records of the party.

[Rajagopalan Ranganathan]

Sir,

In my opinion the supplier of the labourers need not have entered into contract with any other contractor or the individual labourer. If he supplies man power for consideration then he is deemed to provide taxable service. Therefore you are liable to pay service tax under reverse charge mechanism since supply of labourer service is under RCM. Even issue of an invoice demanding consideration for the supply of service will be deemed as a contract.

[KASTURI SETHI]

Invoice is a written contract. It has been held by Bombay High Court in 2007.

[YAGAY andSUN]

In any case, ST is payable on such transactions under RCM.

[DR.MARIAPPAN GOVINDARAJAN]

Shri Rengarajan's reply is very clear on the query. thank you sir

[YAGAY andSUN]

We do endorse the views of our experts.

[KASTURI SETHI]

Queries is lucky to have maximum opinions. Thus he be would be able to take a firm decision.

[Himansu Sekhar]

Sl no 8 of notf 30/12 prescribes supply of manpower in form.This condition is absent in case of direct hiring of labour. No s.tax is leviable.

[Himansu Sekhar]

Again the recipient needs to be a body corporate for rcm

AI Summary

Manpower supply liability may trigger service tax under reverse charge when labour is supplied for consideration. Whether service tax applies to direct hiring of daily-wage labour hinges on three elements: a taxable service provider, a service receiver, and consideration. If labour is supplied for consideration and fits the manpower-supply definition, it is viewed as taxable and may attract reverse charge; an invoice can evidence the contractual supply. Counter-views stress that certain notifications require a specified form of manpower supply or a body corporate recipient, so pure direct hiring without a supply contract may fall outside the provision.