APPLICABILITY OF GST ON PAYMENT OF ACTUAL WAGES THROUGH LABOUR CONTRACTOR, Goods and Services Tax - GST

[kunal kumar]

We are giving services to a company for various IT related services. Now we want to provide Human resource services on actual basis for our customer. We want to do this as a pure agent, and will not charge any extra for the same. Can we make bill like:

Particular qty Amount

Repair of computer 2 Rs. 10,000.00

Salaries for Caller 10 Rs. 50,000.00 (as pure agent)

CGST @9% Rs. 900.00

SGST @9% Rs. 900.00

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Total Taxable Rs. 10,000.00

Total Non-Taxable Rs. 50,000.00

Total GST Rs. 1,800.00

Total Bill Rs. 61,800.00

 

 

Is it allowed in GST billing. And moreover, will Rs. 50,000.00 will counted in agent turnover.

Kindly respond.

Thanks

[Raam Srinivasan Swaminathan Kalpathi]

Your case will not fall under the category of Pure Agent.  Please go through the illustration provided under Rule 33 of CGST Rules, 2017

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir, 

As per your query, the nature of activities does not call for a pure agent.

Agents who supply goods/services to and from the Principal's place of business, with no intent of benefiting from the transaction or hold any title of goods and/or services are known as Pure Agents. The pure agent only takes the supply of goods or services on behalf of the Principal and claims reimbursement of payments made on behalf of the Principal.

Here, Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.

The expenditure or costs incurred by the supplier as a pure agent who contracted to the recipient of the supply of services shall be excluded from the value of supply if all of the following conditions are satisfied:

1. The pure agent makes a payment to a third party, on behalf of the recipient, for procuring a supply when the contract for the supply of services procured is between the third party and the recipient;
2. The recipient of the supply is the only user of the services procured by the pure agent from the third party;
3. The recipient of the supply is liable to make payment to the third party;
4. The recipient of the supply authorizes the pure agent to make payment on his behalf;
5. The recipient of the supply knows that the third party provides the services (for which the pure agent has made payment);
6. The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the agent;
7. The pure agent recovers from the recipient only such amount as has been paid by him to the third party; and
8. The services procured by the pure agent from the third party are in addition to the supply/service he provides on his own.

You can refer to Rule 33 of the CGST Rules.

Hope that you get the answer.

[Shilpi Jain]

Agreement clauses would be required to be seen in this regard.

AI Summary

Pure agent treatment may exclude reimbursed third party costs from taxable value when statutory conditions are satisfied.
Whether payments of actual wages routed through a labour contractor can be excluded from the value of supply under GST as a pure agent depends on statutory conditions: payment to a third party on behalf of the recipient where the contract is between that third party and the recipient; sole user and liability of the recipient; recipient authorization and awareness; agent recovers only amounts paid; separate invoice indication; and services procured are additional to the agent's own services. The advisers concluded the arrangement described does not meet pure agent criteria and highlighted agreement clauses and invoice disclosure.