Levy of service tax on labour contractor

[Sounik Mukherjee]

A labour contractor cooperative has been agreed to supply man power as per requisition of principal employeer. Pricipal employeer will pay wages as per minimum wages Act of W Bengal and production linked incentive to labour contractor per employee. labour contractor will get 2.5% service charges on total wages paid for the month. in this perticular case whether labour contractor will be levied service tax? if yes why and which amout i.e. gross amount or service charges.

AI Summary

Manpower Contractor's 2.5% Service Charge Faces Service Tax Debate Under 'Manpower Recruitment and Supply Agency' Rules A labor contractor cooperative agreed to supply manpower to a principal employer, who pays wages and incentives to the contractor. The contractor receives a 2.5% service charge on total wages. The discussion centers on whether the contractor should be levied service tax. Responses indicate that the service falls under 'Manpower recruitment and supply agency' and is subject to service tax on the gross amount. However, if the contractor acts as a pure agent, service tax is applicable only on the 2.5% service charge. A query about a construction scenario questions the applicability of the manpower supply classification.