Service tax on labour contract

This query is : Resolved

DEEPAK KUMAR (Querist)
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06 January 2012 Respected Expert,

My query is, last year we have contracted with a labour contractor for supplying of labour for our agro based manufacturing unit, we are paying all the statutory liabilities like PF ESI etc, In this context when he is raising bills on us , he is charging the service on the gross bill amount . following way is raising the bills.

500 labour@100 =xxxxxxx

Add:- PF 13.617% =xxxxxxx
Add:- Service Charges 4 per labour = xxxxxx

Total ---------------
---------------
Add Service Tax 10.3% =xxxxxxxx

Total ---------------
---------------
Less:- TDS 1% xxxxxxxxxx

Net payable -----------------
----------------

My query is that whether………….
1) he can make the single bill for whole reimbursement or make separate bills.
2) the below service tax is really our liabilities according to the service tax act . if yes than….
3) on which amount they will charge gross or only service charges @ 4 per labour amount .
4) in this situation according to labour law, what should be meaning of immediate employer.
5) or any other judicial pronouncement do you have or circular kindly provide me.
6) also pls provide me the correct way how do deal with this
7) Can employer deduct the TDS

This is my humble request to you all senior expert pls help me out .

My mail address is Deepak.kr.singh87@gmail.com

Best Regards

Deepak Kumar
+91 9874022265

CA Chitta Ranjan Das

CA Chitta Ranjan Das (Expert)
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06 January 2012 (3) The taxable service is only "service of supply of manpower" and not the "service of manpower" as such. Thus, only charges of labour contractor for supply of manpower should be taxable, and not the entire amount which includes wages to workmen. Basing on this principle, service tax is payable on service charges and not on entire amount. In this case, the service tax payable is to be calculated on 500 labourers @Rs.4/ per labour and not the entire amount.

The way the labour contractor calculated his dues is somewhere accepted as per the circular no. (MF(DR) Circular No.) B1/6/2005-TRU dated 27.7.2005 para 22.4.

However, the above circular is for the guidance only. It is not a part of law and it cannot override it.

Therefore, it is not wrong to say that service tax is payable only on service charges and not on entire gross amount including PF etc.

(7) The employer can deduct TDS on the amount of bill that includes service tax.

(1) The reimbursement of amount (PF etc) should be made in a separate bill.

DEEPAK KUMAR

DEEPAK KUMAR (Querist)
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06 January 2012 Thank you very much for your co-operation sir.

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