Entry for Labour Charges

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This discussion clarifies how an LLP should account for labour charges related to CCTV installation. The consensus is to book labour charges directly as an expense rather than creating a separate ledger for the supplier, unless specific TDS thresholds are met. It also addresses the correct TDS section (194C for installation and materials, not 194J for technical fees) and the importance of GST compliance on invoices.

Suhasini Lad

Suhasini Lad (Querist)
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17 June 2022 Dear All,

We are an LLP Organisation. We do CCTV installation and pay labour charges for the same. The firm installing the CCTV give us an invoice without GST. My question is should I create an account in the name of the person issuing invoice or simple the labour charges paid as expense will do. i.e,
Should I pass the entry as :

Labour Charges Dr. XXX
To Cash/Bank Cr. XXX

Or should I create a ledger in the name of party issuing invoice For ex. If suppose we purchase labour from R C Image Solutions, so the entry will be :

Purchases Dr. XXX
To R C Image Solutions Cr. XXX

And on making payment, the entry would be:
R C Image Solutions Dr. XXX
To Cash/Bank Cr. XXX

Please provide the suggestion.
Thanking in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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17 June 2022 Pass the entry as :
Labour Charges Dr. XXX
To Cash/Bank Cr. XXX

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Suhasini Lad

Suhasini Lad (Querist)
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17 June 2022 Thanks, but sir how I will comes to know whether the limit has exceeded Rs. 30,000/- for TDS purpose. I will have to maintain separate excel sheet for the same.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 June 2022 Yearly limit is 1 lac and each payment limit is 30,000. Yes you have to maintain excel sheet.
If you are using tally it will take care.

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Suhasini Lad

Suhasini Lad (Querist)
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18 June 2022 Thank You sir, We are using Busy Accounting Software. Thank you for your answer/reply.

Suhasini Lad

Suhasini Lad (Querist)
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18 June 2022 Sir, how can we differentiate whether labour charges paid comes under section 194C (Payment to contractor) or 194J (Payment for Technical and professional Fees).

Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 June 2022 Section 44AA defined professional for them 194J applicable rest 194c applicable

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Suhasini Lad

Suhasini Lad (Querist)
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18 June 2022 Sir, will labour charges for installation of CCTV will be considered in 194J.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 June 2022 No, it will be 194c.

Suhasini Lad

Suhasini Lad (Querist)
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18 June 2022 Sir, We have one client located in Bihar, he has a GST No., but does not apply GST on the invoice. He charge us for CCTV Migration, CAT 6 Lan Cable and travelling expenses in one invoice. My question is should we have to bifurcate the same into CCTV migration as Labour charges, CAT 6 cable as Material purchased and Travelling as conveyance or should we considered all three together as Labour Charges. Is it proper on his part to give the invoice without GST, as he has a GST No.

Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 June 2022 Consider all three as service charges.
It's not proper to give invoice without GST once registered under GST.

Suhasini Lad

Suhasini Lad (Querist)
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18 June 2022 Sir, TDS will be deducted under section 194J, is it right. As technical services.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 June 2022 Material and traveling claim included so only 194c applicable.

Suhasini Lad

Suhasini Lad (Querist)
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20 June 2022 Thank you, sir for your reply.