leviability of service tax - Commission on Contract labour

[Asked by Guest]

if i m providing contract labour to companies on a monthly charge of rs.5000/- & my commission is 10%i.e.500/- now whether service tax is chargeable on rs.500/- or 5500/-. if service tax charge on rs.5500/-than under which head, it is taxable.

It is not clarified that whether labour supplied by you is skilled/unskilled labour only or it is Security Man.

[Ravi Chopra]

Service tax is payable on gross amount charged agaist the taxable services provided. In your case gross amount is Rs. 5500/-/ Therefore service tax is chargeable on Rs. 5500/-.

Only on Rs 500 u need to provide for service tax but in the bill it should be evident from documents that 5000 u r reeving for labour supply and paying to labour.See notification 12/03

Till the time you yourself are receiving the total amount of Rs.5500, S.Tax is chargeable on the whole amount. However if you receive commission Rs. 500 and manage to get Rs.5000 straight to the labour, S.Tax is chargeable on the amount of commission received by you i.e. on Rs.500/-.

[Brijesh Verma]

Section 67 of the Finance Act 1994 specifically states that service tax shall be charged on the 'Gross Amount Charged by the Service Provider'. There cannot be any doubt that the gross amount charged by you would not include 'the amount of Rs. 5,000, subsequently paid by you '. In my opinion therefore, tax is required to be paid on the full amount. This tax is required to be paid under the category 'Manpower Recruitment or Supply Agency's Services'.

AI Summary

Service tax on gross amount charged may apply unless only commission is retained by the intermediary.
Leviability turns on whether tax is imposed on the gross amount charged or only on the commission retained; one view applies the statutory rule taxing the full invoiced amount, while an alternative position limits tax to the commission where the supplier merely channels wages to workers and documentary evidence establishes that the wage component is not retained. The service is classified as Manpower Recruitment or Supply Agency Services.