Personal practicle query
This query is : Resolved
Mohit Nyati
(Querist)
18 April 2019
Purchase cost 10/- per unit
Labour cost 5/- per unit
Profit margin 3/- per unit
Sale price 18/- per unit
So GST on 18/-@18% =3.24/- per unit
On Purchase 10/-×18%=1.8/- per unit
Net payable-3.24-1.80=1.44
Where as profit is of only ₹3 per unit.
So on 3/- profit 1.44tax is extremely high.
And than extra liability of income tax also stand.
Therefore I request you to advise that is their any reverse charge mechanism to offset the gst liability on labour cost of ₹5.
However, if a trader was there and he purchased any commodity of Rs15 and sell it @ Rs 18 he has to pay gst on value addition of Rs3 only where as this mfg.unit of which I have mentioned above has to pay gst on Rs 8 from his pocket (18-10) which includes labour cost itself of Rs5.
In both the cases entity earning Rs 3 each but one is paying on value addition of Rs 3 and other on Rs 8 so is there any thing like reverse charge mechanism on labour cost?
Labour cost 5/- per unit
Profit margin 3/- per unit
Sale price 18/- per unit
So GST on 18/-@18% =3.24/- per unit
On Purchase 10/-×18%=1.8/- per unit
Net payable-3.24-1.80=1.44
Where as profit is of only ₹3 per unit.
So on 3/- profit 1.44tax is extremely high.
And than extra liability of income tax also stand.
Therefore I request you to advise that is their any reverse charge mechanism to offset the gst liability on labour cost of ₹5.
However, if a trader was there and he purchased any commodity of Rs15 and sell it @ Rs 18 he has to pay gst on value addition of Rs3 only where as this mfg.unit of which I have mentioned above has to pay gst on Rs 8 from his pocket (18-10) which includes labour cost itself of Rs5.
In both the cases entity earning Rs 3 each but one is paying on value addition of Rs 3 and other on Rs 8 so is there any thing like reverse charge mechanism on labour cost?
Amol S Joglekar
(Expert)
19 April 2019
But that is quite obvious. He can think of getting it subcontracted at 15 from some entity of his choice.
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