Applicability of service tax on labour contract

[vijay rokade]

Our labour contractor is suppling his own employed labour on cotract basis as per the agreemenet,whether these service is applicable for service tax?

[Surender Gupta]

Yes, it appears that your activity is covered by the category of Manpower recruitment and Supply Agency service.

[DEV KUMAR KOTHARI]

Please provide full facts and your own views on the matter, for discussion.

[vijay rokade]

Anybody can give there carrect views regrding the above issue please.

[vijay rokade]

In this case the relationship of employer and employee does not exists,if it so then the labour contractos is covering under the Manpower services.Pls see the crafication on this. Issue - 010.02 / 23.08.07 Business or industrial organisations engage services of manpower recruitment or supply agencies for temporary supply of manpower which is engaged for a specified period or for completion of particular projects or tasks. Whether service tax is liable on such services under manpower recruitment or supply agency's service [section 65(105)(k)] Clarification In the case of supply of manpower, individuals are contractually employed by the manpower recruitment or supply agency. The agency agrees for use of the services of an individual, employed by him, to another person for a consideration. Employer-employee relationship in such case exists between the agency and the individual and not between the individual and the person who uses the services of the individual. Such cases are covered within the scope of the definition of the taxable service [section 65(105)(k)] and, since they act as supply agency, they fall within the definition of "manpower recruitment or supply agency" [section 65(68)] and are liable to service tax.

[Surender Gupta]

Mr. Vijay Rokade, once you yourself has stated the provisions of circular, you need to put the real issue. Where is the confusion or difficulty in deciding the applicability of service tax. Do you think the relation between your client and your employees are also of a employer and employee. If you put your doubt, it would be easy to discuss it further and address your concern.

[DEV KUMAR KOTHARI]

If the contractor is simply providinglabor and charging charges on per day basis or per hour bais ...then it will be supply of manpower. However, if the labor contractor is engaging his workers to carry out contracted work, then it will be works contract. For example ,say for loading of finished goods or carrying out repair work. In case of contract for carrying out the work, it will not be for supply of manpower. Then what type of work is outsourced to the labor contractor, will have to be considered in light of various types of taxable services- awhoe some exercise. I advise Mr. Vijay Rokade to mention full facts and give his views, becasue he being primarily concerned with his problem, must have done some exercise on the problem. That will go a long way in achieving purpose of discussion forum.

[vijay rokade]

Hi Mr Gupta, Thanks for your advice and i would like to state that as per the defination of Manpower recruitment and Supply Agency service those exite the relation of employer and empoyees then they are cover under the Manpower agency but in case od cotract labour the relation of employer and employees remain the same.Just like other companies.One of the notification has clearly mentioned that the labour cotract does not cover under the Manpower Agency and tommarow i will give you that notifiction for yor reference. Thanks

[Surender Gupta]

You did not provide the notification

[YP SOOD]

The contractor falls within the definition of "Manpower Recruitment or Supply Agency" [section 65(68)] and isliable to service tax.

[Guest]

I am a Jute bag manufacturer, for this manufacturing my labour contractor supply his own labour in every month on contract basis as per the agreement, whether these service is applicable for service tax?

AI Summary

Manpower supply service taxable when contractor employs and supplies workers; genuine works contracts are treated differently under service tax. Supply of labour by a contractor who employs individuals and provides their services to a principal is treated as manpower recruitment or supply agency activity and is taxable because the employer-employee relationship is between the contractor and the individuals. If, however, the contractor is engaged to carry out a specific contracted task (a works contract), the arrangement is characterised as a works contract rather than supply of manpower and is treated differently for service tax purposes.