Whether Service Tax is payable on PF/ESIC element paid labour contractor?

[Achyut Kale]

Whether service tax is applicable on PF/ESIC amount charged by the labour contractor? (above two elements are charged on basic amount of daily wages) . Pl guide. A D Kale

[YAGAY andSUN]

Please find the relevant para of Circular No. B1/6/2005-TRU dated 27-07-2005

 22.4 Service tax is to be charged on the full amount of consideration for the supply of manpower , whether full-time or part-time. The value includes recovery of staff costs from the recipient e.g. salary and other contributions. Even if the arrangement does not involve the recipient paying these staff costs to the supplier (because the salary is paid directly to the individual or the contributions are paid to the respective authority) these amounts are still part of the consideration and hence form part of the gross amount.

AI Summary

Service tax on manpower supply includes PF and ESIC contributions as part of the taxable consideration for the contractor. Service tax on supply of manpower is chargeable on the full amount of consideration, which includes recovery of staff costs such as salary and employer contributions; PF and ESIC amounts recovered by a labour contractor form part of the contractor's consideration and must be included in the taxable gross value even if paid directly to the employee or authority.