Under GST scenario supply of labour services is also an important issue. Prior to GST certain Supply of Labour Services were taxable under the Service Act, After introduction of the Goods and Services Tax Act,2017, most of the Supply of Labour Services are taxable. So, we have to know how to handle Supply of Labour Services under the GST Scenario.
1.What is Labour as per Law?
Labour means Practical work, especially when it involves hard physical efforts, workers, especially people who do practical work with their hands”.There are two types of Labour ie one is skilled labour and the other one is unskilled labour. With all the efforts and hard work that have been involved in doing particular piece of work, labour is the amount of physical, mental, and social effort used to produce goods and services in an economy. It supplies the expertise, manpower, and service needed to turn raw materials into finished products and services.
2. What is the definition of supply of Labour?
The supply of labour is the total hours that workers wish to work at a given real wage rate. Labor can be categorized in many different ways. First is by skill level, the most basic is unskilled labor that does not require training. Though it's usually manual labor, such as farmworkers, it can also be service work, such as custodial staff. The next type is semi-skilled labor, which may require some education or training. An example is manufacturing jobs.
Labor can also be categorized by the nature of the relationship with the employer. Most workers are wage employees. This means they are supervised by a boss. They also receive a set weekly or bi-weekly wage and often receive benefits. Contract labor is when a contract specifies the work to be produced. It’s up to the worker to define how it gets done. The amount paid is either commission or a set fee for
the work. Benefits are not paid.
3. How many kinds of Labour Supply?
There are many kinds of supply of Labor services. In construction field daily labour, weekly labour and specialized work labour like Rod Bender, Centring Labour, Plumbing work labour, Masonry work Labour, Electrical work Labour, Tiles fixing work labour, Sanitary fitting work labour, Wood work labour, Water supply line fixing labour, Ceiling fix service labour etc., can be found. Manpower labour supply like industrial security services, Packing , Loading and Unloading services in manufacturing and Industrial sector and Nursing and Sanitary labour supply services in the field of Medical and Health sector and Daily labour for cultivation, Harvesting and other services relating to
agricultural sector.
4. What is the definition of Services under GST Law?
As per Section 2 (102) of the CGST Act,2017, Services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
5. What is the definition of supply of services under GST Law?
Scope of supply under Section 7 includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
6. What is the definition of Pure Labour Contract Services in GST ?
Pure labour contract means, Service Provider enters into a contract with a Recipient to supply labour on contract for execution of services on daily basis or weekly basis or specified work completion basis as per the agreement. Such supplier of service should not utilize any material in supplying the service. It should be a pure labour contract only.
For Services by way of Pure Labour Contract of construction, erection, commissioning, or installation of original works pertaining to a single residential unit pertaining to a single residential unit otherwise than as a part of a residential complex SAC Code is 9954.
7. How GST is applicable on Supply of Labour Services under GST Law?
As per GST Law, if any person or organization supplies labour like manpower supply or Security Services or Supporting Portal Services or Packing, Loading and Unloading Labour supply services or House Keeping Services, Supply of Labour for working in Construction services on daily , weekly basis and work completion basis.
If his annual aggregate turnover (PAN Based) crosses Rs.20 Lakhs (Except North—Easter States) and Rs.10 Lakhs in North Eastern States are liable to take GST registration (As per Notification No.10/2019-Central Tax) and liable to pay GST Tax on his service Income as per prescribed GST Rate under GST Law.
8. What is the SAC Code and Rate of Tax applicable on Supply of Labour Services under GST Law?
| S. No. | SAC Code. | Nature of Service | GST Rate |
| 1 | 998511 | Executive or retained personnel search services or Man Power supply services etc., | 18% |
| 2 | 998512 | Permanent placement services, other than executive search services. | 18% |
| 3 | 998513 | Contract staffing services | 18% |
| 4 | 998514 | Temporary staffing services | 18% |
| 5 | 998515 | Long-term staffing (Pay rolling) services | 18% |
| 6 | 998516 | Temporary staffing-to-permanent placement services | 18% |
| 7 | 998517 | Co-employment staffing services | 18% |
| 8 | 998519 | Other employment and labour supply services nowhere else | 18% |
| 9 | 9954 | Services by way housing keeping such as plumbing, carpentering, etc., where the person supplying such service through electronic commerce operator is not liable for registration under sub-section (1) of Sec.22 of the CGST Act,2017. | 5% |
| 10 | 995451 | Pile driving and foundation services | 18% |
| 11 | 995452 | Building framing & Roof framing services | 18% |
| 12 | 995453 | Roofing and waterproofing services | 18% |
| 13 | 995454 | Concrete services | 18% |
| 14 | 995455 | Structural steel erection services | 18% |
| 15 | 995456 | Masonry Services | 18% |
| 16 | 995457 | Scaffolding services | 18% |
| 17 | 995458 | Other special trade construction services | 18% |
| 18 | 995461 | Electrical installation services including electrical wiring & fitting services, fire alarm installation services, burglar alarm installation services | 18% |
| 19 | 995462 | Water plumbing and drain laying services | 18% |
| 20 | 995463 | Heating, ventilation and air-conditioning equipment installation services. | 18% |
| 21 | 995464 | Gas fitting installation services | 18% |
| 22 | 995465 | Insulation services | 18% |
| 23 | 995466 | Lift and escalator installation services | 18% |
| 24 | 995471 | Glazing services | 18% |
| 25 | 995472 | Plastering services | 18% |
| 26 | 995473 | Painting services | 18% |
| 27
|
995474 | Floor and wall tiling services | 18% |
| 28 | 995475 | Other floor laying, wall covering and wall papering services | 18% |
9. Are any exemptions available to Supply of Labour Services under GST?
The following services, which are of the nature of Pure Labour Services or where the labour components is substantial, are exempt under the GST:
| S.No. | Entry No. | Nature of Service |
| (i) | 3 of N.No. 12/2017. | Pure services (excluding works contract service or other composite supplies involving supply of any goods), provided to the Central /State Government or UT local authority or a Government authority or a Government, Entity, by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. |
| (ii) | 3A of N. No. 11/2017 | Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply, provided to the Central/State Government or Union territory or local authority or a Government authority or a Government Entity, by way of any activity in relation to any function entrusted to a Panchyat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. |
|
(iii) |
10 of N. No. 12/2017 |
Services provided by way of Pure Labour Contract 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. |
| (iv) | 11 of N. No.
12/2017 |
Services by way of Pure Labour Contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex. |
10. If the service provider is not having GST Registration, what is the role of Recipient under GST Scenario?
If the service provider is not a registered person, and if the Service Recipient is a registered person, under those circumstances, Service Recipient is liable to pay appropriate GST Tax on Reverse Charge Basis (RCM) and is eligible to claim Input Tax Credit (ITC) under GST Scenario subject to notifications and conditions therein.
11. Is it mandatory to take registration by Supply of Labour Service provider under GST?
Yes, As per Section 22(1) of CGST Act,2017 and Notification No.10/2019-Central Tax, Dated.7’March,2019, w.e.f. 01.04.2019, If the service provider is having Aggregate annual turnover of Rs.20 Lakhs (Except North Eastern States ) and in North Eastern States Rs.10 Lakhs shall take registration under GST Law.
12. Is it mandatory to file Returns under GST by Supply of Labour Service provider under GST Law?
Once the service provider has taken registration as per Sec.21 (1) of CGST Act, he has to follow statutory obligation as per GST Law and liable to file required GST Returns as per sec.37 of CGST Act,2017 and discharge his tax liability as per prescribed dates under GST Law.
13. If Supply of Labour Service provider is eligible to claim Input Tax Credit on his inputs under GST?
Yes, if Supplier of Labour Service is having registration and discharges tax liability he is eligible to claim Input Tax Credit (ITC) on inputs used in the course of business as per Sec.16 (1) of the CGST Act,2017.
14. Is Labour service provider liable to issue Tax Invoice for his service under GST Law?
Yes, once he has taken registrations, he is liable to issue Tax invoice as per Section 31 with appropriate SAC Code and GST Rate on such tax invoice.
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