Will the GST applicable if we paid the bonus to the contract employees through the contractor.

[Balamurugan R]

We are having the contract employees in our factory, Contractor is the one point contact and we are paying the wages, bonus to the contractor and they will distribute the same to the respective employees, Now we are paying the bonus to the employees through the contractor, When they raising the bill to us, Do they need to charge GST for this? Kindly clarify

Thanks in advance.

[Rajagopalan Ranganathan]

Sir,

According to Section 2 (32) of CGST Act, 2017 -

“consideration” in relation to the supply of goods or services or both includes -

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government :

Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.

Therefore in my view what ever amount paid by you to the contractor for supplying man power supply gst is leviable on th

[Ganeshan Kalyani]

I agree with the expert, the bonus paid to contractor who in turn will give it to his employees is nothing but a consideration in the hands of the contractor and GST is applicable on the same. Contractor will raise an invoice on you along with GST.

[KASTURI SETHI]

In this scenario, transaction is between you (service receiver) and contractor (service provider). Third person (employees who will factually receive bonus) is not in picture. Bonus paid to employees through contractor conforms to the definition of 'consideration' under Section 2 (31) of CGST Act. Hence taxable.

I concur with the views of both experts.

[YAGAY and SUN]

In addition to above replies, even under the provisions of labour laws, if contractor do not pay wages/bonus to contract labour then the principal employer will be under statutory obligation to pay it to the contract labours and get it recovered from the bill amount as raised by the contractor. Even such cases GST at applicable rates would be applicable.

AI Summary

Consideration under GST: bonus paid via contractor is taxable as consideration, contractor must charge GST on invoice.
Bonus amounts paid by a principal employer to a contractor for distribution to contract employees constitute consideration for the supply of manpower services under the CGST framework. Such sums must be included in the contractor's invoice and are subject to GST at the applicable rate; even payments made by the principal under statutory labour obligations and recovered from the contractor are treated similarly as taxable consideration.