Labour Cess

[Guest]

When raising invoice to client along with labour cess like (civil works + labour cess), on labour cess, whether we need to charge GST or not. Kindly clarify, if any notification please provide me.

Regards

Chandan

[KASTURI SETHI]

No deduction is allowed on labour cess. GST has to be paid the value of civil works including cess). Also see replies posted against Issue Id No.115480 dated 2.10.19

[PAWAN KUMAR]

The value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than CGST, IGST, UTGST act. As per the section 15 (2)(a) labour cess is also includible in value of supply. GST is payable on this component of labour cess. as per my view.

[Ganeshan Kalyani]

Yes the labour cess should be considered to charge GST.

[YAGAY andSUN]

In the case of Delhi Metro Rail Corporation vs Simplex Infrastructures Limited, Delhi High Court, 2011 = 2011 (8) TMI 1323 - DELHI HIGH COURT, where, the high court held that, the subject matter of the Cess Act is the activity of building and construction, the object is to augment the Welfare Fund under the BOCW Act and the essential purpose is to benefit the building and construction worker. The ‘ultimate or incidental results or consequences’ might be that contractors have to part with 1% of the bill amount towards the cess. However, that does not detract from either the ‘primary object’ of the Cess Act or its ‘essential purpose.’ Applying the Hingir Rampur tests, it has to be held that the Cess Act cannot be construed to be a tax at all.

Further in GST various types of cess, taxes, duties which was levied and collected as Indirect Taxes, were subsumes but cess like Building cess, Professional tax and labour etc. were not out of the purview of subsumed into GST as these are not Indirect Tax. In our view, on it GST is not applicable.

AI Summary

Labour cess included in taxable value under GST, so GST applies to the cess despite judicial classification disputes Labour cess charged on civil works invoices is commonly treated as part of the taxable value and GST is payable on the cess because value of supply includes cesses, fees and charges; however, a contrary view based on judicial reasoning contends certain cesses are not taxes and were not subsumed into GST, so GST should not apply to those cesses.