GST APPLICABLE ON LABOUR CESS AND SEIGNORAGE FEES

[Mukesh Gupta]

Dear Sir,

I have got work contract from Bihar Government for various work. In Some work contract Contract Value show as follow

Cost of Work = Rs.100

GST @12% =Rs. 12

LABOUR CESS 1% =Rs. 1

SEIGNIORAGE FESS = Rs. 5

TOTAL WORK CONTRACT =Rs.118.

MY QUESTION IS I AM LIABLE FOR GST ON LABOUR AND SEIGNIORAGE FEE OR NOT.

BECAUSE IN AGREEMENT LABOUR CESS AND SEIGNIORAGE FEES GIVEN BY BIHAR GOVERNMENT SEPARATELY AND THAT AMOUNT DEDUCTED BY DEPARTMENT .

But GST Officer demanding gst on Labour cess and Seigniorage fees.

I ALSO RAISED THE GST INVOICE TO BIHAR GOVERNMENT AS FOLLOWS

COST OF WORK DONE =Rs.100

GST@12% = Rs.12

LABOUR CESS = Rs.1

SEIGNIORAGE FESS = Rs.5

TOTAL VALUE OF INVOICE =Rs.118

[Shilpi Jain]

Further details required. Whether this labour cess and seigniorage fee is part of consideration (looks so as per the query)? Why is this deducted?

[Mukesh Gupta]

In Government Work Contract Client are responsible for deduction of Labour and Cess and Seigniorage Fees and Deposite to concern department.

[Mukesh Gupta]

In Government Work Contract Client are responsible for deduction of Labour and Cess and Seigniorage Fees and Deposited to concern department against the work. Contractor are not responsible deposit of Labour cess and Seigniorage Fees.

[Amit Agrawal]

One needs to know more about applicable act / rules / notification etc. about subject labour-cess and seigniorage fees, before answering the question raised.

In this case, Clause (a) & (b) of Section 15 (2) of the CGST Act, 2017 may worth noting:

"The value of supply shall include–––

(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;"

[Shilpi Jain]

The moment the labour cess and the seinorage fees is a deduction from your payment it means it is a consideration for your work done and thereby the GST applicable on your output work will be liable to be paid on these 2 amounts also as your output tax.

[Mukesh Gupta]

Dear Mam,

If GST applicable on Labour Cess and Seigniorage fees then why government department Labour cess and Seigniorage fee given separately without GST. My question is Government Department has not given GST on Labour Cess and Seigniorage fees why i not GST on Labour cess and Seigniorage.

[Shilpi Jain]

Just because govt department has not given gst would not mean that gst is not liable.

Also the view given is based on limited facts available

[Ganeshan Kalyani]

As per Sec 15(2) any tax other than GST is includible in the value of supply to charge GST.

[KASTURI SETHI]

The department is legally correct in demanding GST on cesses mentioned by the querist. Section 15 of CGST Act is very much clear.

[Gunjan Shah]

Contractors are required to pay welfare cess at the rate of 1% of the cost of work incurred by them under the Building & Other Construction Workers Welfare Cess Act, 1996. It is a means to provide health and welfare measures for the workers engaged in building and other construction works. Building and other construction workers are one of the most numerous and vulnerable segments of the unorganized labour in India. Therefore the said welfare cess is reimbursed by the service recipient to the supplier in almost all the cases.

So my question is, when actual expenses paid to service provider are reimbursed by the service receiver, the said reimbursed amount shall be excluded in the capacity as a 'Pure Agent‘ what's your take on the same? I request the experts to share their views

[Amit Agrawal]

Dear Shri Kiran Tahelani Ji,

It is suggested to raise separate / independent query (instead of clubbing your issue here). This will help you get better response/s.

[CA Aakash]

Dear Mukesh,

I don't get it why you are showing BOCW CESS (labour) and Seigniorage fees at same time.

Reason being:

1. Seigniorage fee is a charge levied by the government on the face value of the currency notes and coins issued to cover the costs of minting or printing and distribution. The fee varies by country and is often used as a source of revenue for the government.
2. And, BOCW cess (Labour Cess) is a tax levied by the government on construction projects to support the welfare of construction workers. The rate of the cess varies from state to state in India, and the revenue generated is used for the benefit of construction workers, such as providing them with better living and working conditions, healthcare, education, and other facilities.

Both can't be charges on same invoice.

However if I have to advise you regarding whether GST is leviable on Both or not then for:-

1.Seigniorage is the profit earned by the government by issuing currency, and it is not considered as a supply of goods or services under GST. Therefore, GST is not applicable on seigniorage fees charged by the government.

2. Labour cess:- As per Sec 15 Value of Supply will be such as the price paid or payable for the supply, any taxes or duties payable, and any incidental expenses incurred by the recipient.

Labor Cess are not liable for GST as they are not considered as part of the taxable value of supply.

So your new calculation be as follows:-

Cost of Work = Rs.100

GST @12% =Rs.12

TOTAL value of bill =Rs.112

Deductions:-

LABOUR CESS 1% =Rs.1.12

SEIGNIORAGE FESS = Rs.5

TDS-IT @2%

TDS-CGST @1%

TDS-SGST @1%

(Note: Labour cess will be applicable on Gst portion also)

Regards,

CA Aakash deep

[email protected]

(Feel free to ask any Query)

AI Summary

Value of supply includes non GST cesses, so labour cess and similar fees may be taxable under GST if includible in consideration.
Contractor invoices for work list labour cess and seigniorage fees separately, which the government department deducts and remits. Under Section 15(2) of the CGST Act, the value of supply includes taxes, duties, cesses and fees charged separately or amounts the supplier is liable to pay but which the recipient incurs; contributors therefore treat such cesses as includible in the taxable value and subject to GST unless a statutory exclusion or valid pure agent treatment applies.