Service tax on labour contractor

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 April 2013 We are constructiong a shop building for self use. we are purchasing all construction material and contracts are given to different persons for execution of different works as excavation, centring, brick work, plaster work etc. is service tax liable for such transaction?

CA Vipin Jain

CA Vipin Jain (Expert)
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20 April 2013 Yes, service tax is applicable on service charges paid to different contracts and the contractors need to pay service tax not you if service is not covered under reverse charge mechanism.

Querist : Anonymous

Querist : Anonymous (Querist)

20 April 2013 thank you sir, but can i know whether these particular services mentioned above are under reverse charge mechanism or not?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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24 July 2025 Here’s a clear answer for your query on **service tax and labour contractors in construction**:

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### 1. **Are the services like excavation, centering, brickwork, plaster work liable for service tax?**

* Yes, **service tax was applicable on labour contract services** under the category **“Labour Contract Services”** (before GST regime).
* This means the contractor who provides these services is liable to pay service tax on the service portion of the contract (i.e., service charges or margin).

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### 2. **Who is liable to pay service tax?**

* **Normally, the labour contractor/service provider is liable to pay service tax** on the taxable value of service.
* You, as the principal or recipient, are **not liable to pay service tax unless notified otherwise** under the Reverse Charge Mechanism (RCM).

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### 3. **Is this service covered under Reverse Charge Mechanism?**

* **Generally, Labour Contract Services were NOT under Reverse Charge Mechanism** for construction activities unless specified.
* However, service tax on labour contract services was to be paid by the contractor.
* RCM applied to very specific services (like GTA, legal services to company, sponsorship services, etc.) but not on regular labour contracts for construction.

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### **Summary:**

| Service | Who Pays Service Tax? | Under Reverse Charge? |
| ------------------------------------------------------------- | ----------------------------- | --------------------- |
| Excavation, Centring, Brick work, Plaster work by contractors | Contractor (Service provider) | No (Generally) |

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### Important Notes:

* This is **pre-GST regime** info. After July 2017, GST replaced service tax.
* Under GST, labour services are part of taxable supply and GST is applicable.
* If you want to check if any specific Reverse Charge applies under GST, please share details.

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If you want, I can help explain the **GST impact** on your contracts or draft the relevant clauses for contracts to clarify tax liabilities. Would you like that?

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