Reverse charge on supply of manpower

This query is : Resolved

Ravi Jagetiya(CA Final) (Querist)
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03 January 2013 Dear sir,

My Client is in construction of residential complex. He used to receive manpower for various work on site. supplier of manpower gives bill as under-:
100 Number of person each 300 per day = 30000
Fee of manpower supply 100 Number of person each 30 per day = 3000
Total = 33000/-
No service tax is charged by him.
Q.1 Reverse charge is applicable ?
Q.2 Reverse charge on which amount ?
Q.3 If it is mentioned in invoice that there is contract for loading, filling, etc. If there is a contract for these works and consideration is related to quantum of work and not related to number of laborers supplied then Reverse charge is applicable or not ?

Regards & Thanks
CA Ravi K Jagetiya

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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03 January 2013 Yes,the reverse charge is applicable if the service provider is a HUF, individual,proprietary firm or partnership firm including LLP. Reverse charge on entire amount.The recipient is to pay service tax on the said value at the rate of 9.27%

srinivasan

srinivasan (Expert)
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03 January 2013 Yes Mr. hanumantha is correct. Further, to determine whether a contract is for works or for supply of manpower you need to apply the test of effective supervision and control. If the supervision and control is retained by the service receiver and the scope of service provider is restricted only to the supply of labour then it can by no streatch of imagination termed as contract of work only because the manpower supplied by the contractor is being used in construction work.

On the contraty, if the agreement is for execution of certain work and the measure of payment is based on the manpower used by the contractor in execution of the work, even then it would only partake the nature of a contract of work and cannot be termed as supply of manpower.

Thus, who effectively has the supervision and control of the workers will be one of the key ingredient tested for determining the nature of contract. So be very specific in documentation to potraint the scope clearly.

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CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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03 January 2013 Apart from above, it is also required to check whether your client is a company or not.
If it is not then reverse charge will not be applicable