Goods and Service Tax implementation has left its vast effect on the various sector and labour sector is one of the same. The present article helps to analyze the types of the labour contract, exemption available under GST to pure labour contract and GST tax implication on outside hired labour.

TYPES OF LABOUR CONTRACT –

The Labour contract can be of the following two types –

1. Labour contract involving the supply of both material and labour –

When labour contract involves both supply of labour as well as material, the said contract is termed as ‘works contract’.

2. Labour contract involving the supply of only labour –

When labour contract involves the supply of only labour, the said contract is termed as ‘pure labour contract’.

GST RATES ON LABOUR CONTRACT –

GST rate in both the case is 18%. However, the certain service provided under the pure labour contract is exempted and the same is briefed hereunder.

EXEMPTION FROM GST TO PURE LABOUR CONTRACT –

Vide notification no. 12/2017-Central Tax (Rate) dated 28th June, 2017, the following services of ‘pure labour contract’ are exempted from GST –

1. Services of construction / erection / commissioning or installation of original works pertaining to a ‘single residential unit’ otherwise than as a part of a residential complex.

2. Services of construction / erection / commissioning / installation / completion / fitting out / repair / maintenance / renovation or alteration of a civil structure or any other original works pertaining to the beneficiary led individual house construction or enhancement under the housing for all (urban) mission or Pradhan Mantri Awas Yojana.

TAX IMPLICATION ON OUTSIDE HIRED LABOUR –

1. OUTSIDE HIRED LABOUR ARE REGISTERED UNDER GST –

In case the labour supplying agency is registered under GST, then, the agency would be charging GST for the labour supply and the labour contractor will get the input tax credit of the same.

2. OUTSIDE HIRED LABOUR ARE NOT REGISTERED UNDER GST –

In case the labour supplying agency is not registered under GST, then, the labour contract is required to pay Goods and Service Tax on the same under the reverse charge mechanism.

More Under Goods and Services Tax

35 Comments

  1. PRASENJIT MAJUMDER says:

    My client deals in stone whole sale business.
    He purchased stone from another sate and carrying by Rail. At the time of Unloading He(Client) has paid Daily Labour Charges. My question is GST is applicable on this Labour Payment. If applicable then How?

  2. clalchhuanawma says:

    Public Works department(PWD) engaged pure muster roll labour for road maintainance work, and not contract. Is GST applicable on them ?

  3. Ajay kumar says:

    Please intimate GST rate applicable for outsourcing of services of AC Plant or DG set installation by deploying manpower Contract for 11 months duration

  4. Thadiyan srinivasan says:

    Dear Sir,

    Please let me know, whether ESI Applicable even purely supply of labour also?. Please guide me, one of my client by mistakeny registered with ESI as per compulsion of labour officer. Now there is a demand of Rs.4L.

  5. Rajdeep Sharma says:

    Sir I’m a precast manufacturer. I have a query that precast material comes under 18% GST. I’m ok with that but my CA tell me pure labour contract cannot be applied on commercial projects (industrial/private tenders and government tenders) please clear my doubt

  6. abk nair says:

    Sir,
    I am constructing an independent house for my self.
    Can I get input credit to be set off with my housing loan against materials purchased in my name in which case should hire a work contractor or pure labour contractor? Please Guide.

  7. abk nair says:

    Constructing House for own use. Should I use a turnkey contractor or a labor contractor. Which is the best option to minimize GST and whats the GST rates applicable.Please guide
    Sr Citizen

  8. Priyanshu Jain says:

    Sir ,
    I’m supplying labour in munciple boards for cleaning work/computer operators / drivers/ maintenance work/ bagvan etc.. is this type of work under GST or not ???

    1. Thakorbhai Patel says:

      What if GST rates on Errection of submerged pump for clear water. Main contractor Aqua MAchinerries Pvt. Ltd. client Vadodara Municipal Corporation and Aqua Mach. sub let to us.

  9. sivanagababu gona says:

    HI TAX GURU
    I HAVE COMPANY IT WORKS FOR SUPPORTING USA CONSULTIING COMPANY . THAT IS MANPOWER SUPPLING COMPANY .. WE GIVE SERVICES FOR THAT COMMAPNY WE HAVE 5 PEOPLE , THEY FINDING NEEDY PEOPLE AND COMPANYS
    WHAT IS GST RATE FOR THAT SERVICES

  10. karim says:

    i;m a treasurer of co-op hsg soc, recently our society under went major Terrace repair works, multiple vendors and contractor had supplied materials and services to society and charged as GST in their invoice,
    i want to understand 1) whether Co-op hsg soc is eligible for GST 2) what is the procedure to get refund for those GST paid

  11. SachinGuru says:

    Sir Gud evening, Government Civil Contract works to supply of labour charges purely manpower how much GST rate applied? Plz send any reference

    1. Rangaraju says:

      I am residing in an apartment complex. We have hired agencies for security and garden maintenance. They are charging 9%+9% GST. Their bill include salaries and fees. If we pay the bill as it is, it amounts to paying g s t even for PF and ESI contribution. If we take the bill in two parts mentioning reimbursement of salaries and fees , we can charge GST only for fees and not for salaries. Moreover, the work turned out by them neither quantified nor produces any marketable products. Is it legal please clarify my doubt.

  12. Saranraj says:

    Sir. I am working labour contractor company my one day pay Rs.418; monthly Rs.8.800 but my contractor ower monthly I salary tax-Rs.250 charge please help labour worker tax included not nil sir

  13. Manoj Sabhnani says:

    for the constuuction comoany if i want to make a bill for builder for example 10 lacs the what gst is charged on that
    i dont want ITC input on that
    please reply

  14. Parameshwar says:

    Sir I have contract work under labour contract at manufacturing company. I wants know what is limit
    for contract amount for the financial year 2019-20 without GST Registration.

  15. ramesh says:

    sir my labour supply business as labour for book binding works i have not taken gst registration please give me suggestion gst need for me or not.

  16. HONEY says:

    HI TAX GURU,

    I AM GETTING A LBAOUR CONTRACT TO SUPPLY LABOUR OUTSIDE INDIA, MY CLIENT WILL PAY ME IN USD. NOW PLEASE ADVISE IT IS MANDATORY TO REGISTERED UNDER GST AND WHAT TYPE OF REGISTRATION, WHAT IS THE GST %

    THANKS

  17. vittal says:

    i am civil contractor involving contraction of residential house @ village what is GST rate applicable for me (all material supplied by house owner)

  18. Infant Maria Roger says:

    Dear taxguru, I am a works contractor. My auditor says that from April 1 2019, i can continue charging 18% of my bill, and take input tax credit. or if can choose 5% GST without input tax credit. is it right.
    because presently I’m working for a school with 5% GST only.

  19. Ramamoorthy says:

    Hi,
    If we hire labour contractor for pure labour supply what is the GST applicable
    2/ If the contractor is not registered, whether GST is applicable
    3/ If the contractor is having a turnover of less than Rs.20.00 lakhs, whether GST is applicable

    1. ttrao says:

      if pure labour contractor exceeds 20 lac turnover during the AY:2019-20 what will be the liablity under gst . if assessee is not registered than what will be the impact on income tax and gst ?
      please clarify.

  20. Sunil Kumar Aarwala says:

    Lets say Company ‘’A’ is engaged in fire and security service and provides its security services with its management to Company ‘B’. Company A charges agreed amount from company B for its service and charge GST on its amount.

    Now Company A wants to deploy its manpower to Company B on secondment basis for certain period of time.

    Case1 : The employees remain on the role of company A, but their salary is paid by company B directly to employees as per advise of company A. In this case all PF, TDS etc will be complied and deposited by Company A. Company A charges or may not charge for management service part for certain amount say 5% from company B. What will be treatment of GST on salary part paid by company B

    Case 2: The employees are transferred temporarily to company B on secondment basis for certain period where company B processes their salary including their PF and TDS. But engagement and gratuity and long term leave etc remain with company A. GST impact on the same

  21. sushil says:

    HI Tax Guru, I just wanted to know the exact tax rate for hired labour contractors suppose we will supply the labours to the end user or B2C . Then what is final rate of GST rate…?

    plz help.
    Thanks
    Sushil .
    m- +91- 97653 38774.

  22. Gurdip Singh says:

    How much GST is applicable on a works contract concluded for provision of the services of outsourcing for operation of Air Conditioning / electrical installations

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