Reverse charge on labour charges

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 June 2013 We receive bills from vendor as labour charges for various work done in our factory. Does these charges comes under the per-view of supply of manpower or work contract?

Example of such expenses are : Labour used for polishing of marble, charges for shifting of material, etc

Also state our liability in this case.

Vendor does not charge and service tax on his bill

Rupesh Jain

Rupesh Jain (Expert)
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14 June 2013 supply of man power
and pay reverse charge on labour charges
75% of service tax to be deposited when your company.

if labour supplier is company then no service tax liability .

RENGARAJ R.K

RENGARAJ R.K (Expert)
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14 June 2013 Reverse charge is applicable only for Companies Registered under the Companies Act or a business entity registered as body corporate. In your case you have not indicated whether you are coming under these category.

Supply of manpower is coming under reverse charge and it is different form works contract of civil or other contract. For manpower service the labour contractor has to pay service tax @12.36% on 25% and Company 75%. In your case it is marble polishing is coming under works contract.

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Querist : Anonymous

Querist : Anonymous (Querist)

14 June 2013 We come under the category of public company.
In case of marble polishing the bill raised by the vendor is only as a labour charges. Will it still come under the category work contract?

Ganeshbabu K

Ganeshbabu K (Expert)
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14 June 2013 Please note

1)Service will be considered as manpower supply only if the labour work is under superintendence or control of Principal Employer.

2)If work is being done under control of contractor and he is having high responsibility to complete work..It will not come under "manpower supply of services" it is pure labour contract and service tax will not be applicable.

Please note definition of manpower supply..

“Supply of manpower” means supply of manpower, temporarily or otherwise, to another person to work under his superintendence or control.’ [Rule 2(g) of Service Tax Rules, inserted w.e.f. 1-7-2012].

So dear author do refer as per this and confirm your self whether it is labour contract or manpower supply service.

Thanks & regards
Ganeshbabu k

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Ganeshbabu K

Ganeshbabu K (Expert)
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14 June 2013 Reverse charge in case of manpower supply:-

1)75% tax by service receiver if service provider of manpower supply is individual, HUF, proprietary or partnership firm or AOP.

2)Service receiver to pay service tax of his part by GAR-7 challan. Service receiver liable for only his part and not entire amount, even if service provider does not charge his portion of service tax.

3) Cenvat credit cannot be used to pay tax by service receiver. Service tax as to be paid by cash only i.e. GAR-7 challan.

4)Once paid, Cenvat credit can be taken if otherwise it is his eligible ‘input service’.

5)Tax should be paid under service tax registration number of service receiver and included in his return as he is liable to pay service tax.

6)Service tax is payable by service receiver when actual payment is made to service provider and not on receipt of Invoice from service provider. However, if payment is not made to service provider within 6 months, service tax is anyway payable. Interest is also payable.

Thanks & regards
Ganeshbabu k

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