Service Tax on Labour Contract
This query is : Resolved
13 March 2020
My client does not have any service tax number. He deals with fabrication work. He works as a sub-ordinate labour so does not buy any material nor he sales it, he only does labour work under the company. So is service tax applicable for him?
13 March 2020
service tax is no more
and gst is effective from july 2017, & gst not applicable until ur receipt Exceed 20lakh
and gst is effective from july 2017, & gst not applicable until ur receipt Exceed 20lakh
13 March 2020
GST has replaced Service Tax, VAT & CST in the Country.
Person have to apply for GST registration if the aggregate turnover exceeds the threshold limit.
Person have to apply for GST registration if the aggregate turnover exceeds the threshold limit.
14 March 2020
My client does not have any service tax number and we got notice from service tax for scrutiny. He deals with fabrication work. He works as a sub-ordinate labour for labour of tanks so does not buy any material nor he sales it, he only does labour work under the company. So is service tax applicable for him? How can i win the case or prove him not guilty as he is not educated person and the income shown in ITR is different from the one shown in TDS
24 July 2025
Got it. Here’s a clear breakdown for your client’s situation:
---
### Key Points:
1. **Service Tax is Abolished Since July 2017**
India replaced Service Tax with GST (Goods and Services Tax) from 1st July 2017. So, any notice referring to Service Tax after that date is likely outdated or related to historical periods before GST.
2. **GST Applicability**
Under GST law:
* Registration is mandatory if aggregate turnover exceeds Rs. 20 lakh (Rs. 10 lakh in some states).
* Labour contracts and fabrication services are taxable under GST, but only if turnover crosses the threshold.
3. **Your Client’s Position**
* Your client does only labour work (subordinate labour) and does not supply material.
* If his **annual turnover is below the GST threshold**, then he is not liable to register or pay GST.
* Prior to GST (pre-July 2017), service tax may have applied if turnover was above Rs. 10 lakh for taxable services.
* However, service tax was usually applicable on service providers, not on pure labour where no service element is involved separately (depends on contract and classification).
4. **For the Notice / Scrutiny**
* Check the period to which the service tax notice relates. If it is for pre-July 2017 period, verify if your client was liable to register/pay service tax for that period.
* Gather evidence of turnover, contracts, and payments received.
* Show the client did not cross the service tax threshold or was not involved in taxable service (e.g., only labour charges may sometimes be exempt).
* Also, note the difference between income shown in ITR and TDS. TDS differences can be reconciled via payment proofs, contracts, and bank statements.
5. **How to Defend?**
* Submit a written reply to the scrutiny explaining the client’s nature of work, turnover, and why service tax was not applicable.
* Attach supporting documents (invoices, contracts, bank statements, ITR).
* Highlight that GST replaced service tax and clarify period concerned.
* If turnover is below threshold, emphasize exemption.
* If no taxable service, state that labour-only activity is not taxable under service tax.
---
### Summary for Your Client:
* **If the notice relates to a period before July 2017**, and turnover exceeded threshold, service tax may apply; else not.
* **If notice is for post-July 2017**, service tax is obsolete, refer to GST rules.
* Labour-only work sometimes not treated as taxable “service” for service tax purposes — depends on specifics.
* Show evidence to the department and request closure if no liability.
---
If you want, I can help draft a formal reply to the department or guide you on required documentation. Would you like that?
---
### Key Points:
1. **Service Tax is Abolished Since July 2017**
India replaced Service Tax with GST (Goods and Services Tax) from 1st July 2017. So, any notice referring to Service Tax after that date is likely outdated or related to historical periods before GST.
2. **GST Applicability**
Under GST law:
* Registration is mandatory if aggregate turnover exceeds Rs. 20 lakh (Rs. 10 lakh in some states).
* Labour contracts and fabrication services are taxable under GST, but only if turnover crosses the threshold.
3. **Your Client’s Position**
* Your client does only labour work (subordinate labour) and does not supply material.
* If his **annual turnover is below the GST threshold**, then he is not liable to register or pay GST.
* Prior to GST (pre-July 2017), service tax may have applied if turnover was above Rs. 10 lakh for taxable services.
* However, service tax was usually applicable on service providers, not on pure labour where no service element is involved separately (depends on contract and classification).
4. **For the Notice / Scrutiny**
* Check the period to which the service tax notice relates. If it is for pre-July 2017 period, verify if your client was liable to register/pay service tax for that period.
* Gather evidence of turnover, contracts, and payments received.
* Show the client did not cross the service tax threshold or was not involved in taxable service (e.g., only labour charges may sometimes be exempt).
* Also, note the difference between income shown in ITR and TDS. TDS differences can be reconciled via payment proofs, contracts, and bank statements.
5. **How to Defend?**
* Submit a written reply to the scrutiny explaining the client’s nature of work, turnover, and why service tax was not applicable.
* Attach supporting documents (invoices, contracts, bank statements, ITR).
* Highlight that GST replaced service tax and clarify period concerned.
* If turnover is below threshold, emphasize exemption.
* If no taxable service, state that labour-only activity is not taxable under service tax.
---
### Summary for Your Client:
* **If the notice relates to a period before July 2017**, and turnover exceeded threshold, service tax may apply; else not.
* **If notice is for post-July 2017**, service tax is obsolete, refer to GST rules.
* Labour-only work sometimes not treated as taxable “service” for service tax purposes — depends on specifics.
* Show evidence to the department and request closure if no liability.
---
If you want, I can help draft a formal reply to the department or guide you on required documentation. Would you like that?
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