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 Applicable on Full Manpower Supply Costs, Including PF/ESIC Contributions, per Circular No. B1/6/2005-TRU. A discussion was initiated regarding whether service tax is applicable on the PF/ESIC amounts charged by a labor contractor, which are based on the basic daily wages. A response referenced Circular No. B1/6/2005-TRU, stating that service tax should be charged on the full amount of consideration for manpower supply, including staff costs such as salaries and contributions, regardless of whether these costs are paid directly to individuals or authorities. These amounts are considered part of the gross amount for service tax purposes.