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.

[Guest]

The service of this nature would fall under the category of 'Manpower recruitment and supply agency' which includes the service of supply of manpower, temporarily or otherwise. The levy would be applicable on the gross amount.

[Surender Gupta]

In general labor contractors are the actual employers and provide the labor on contract basis to the company. Therefore, you need to pay service tax gross amount including wages. However, if you satisfy that the you are acting as a pure agent, you need to pay service tax only on 2.5% received as service charges.

[Guest]

Your case falls under the category of manpoower recruitment or supply agencies services an subjected to attract service tax on gross amount

[Guest]

Qurey 

If construction company appoint a small contractor for painiting or plastering etc and contractor him self arrange labour :   labour are under the supervision of contractor and principal has no supervision or control over the labor 

then still it covered under the man power supply.

 

Thanks in advance

Ritesh khurana 

AI Summary

Supply of manpower services liable to service tax on gross consideration; pure agent exception limits taxable amount to service charge. Supply of manpower by a labour contractor is treated as manpower recruitment and supply agency services attracting service tax on the gross amount paid; however, if the contractor is a pure agent merely arranging payments, the taxable value may be limited to the service charges retained by the contractor rather than the entire gross payments.