Work contract - labour

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 August 2016 Dear Expert,

how much we charge service tax on site work (labour).

pls let me know asap, pls share notification also

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 August 2016 You have to charge 15% service tax on site work(labour). See Rule 2A of service tax (Determination of valuation Rules).

Querist : Anonymous

Querist : Anonymous (Querist)

11 August 2016 if materials included then ?

Pls also suggest part of TDS, if we are paying lumsum to our vendor for labour and materials then tds would be @ 2% ?

secondly, only tds will applicable for deduction or WCT will required when payment made to our vendor

actually or client is deducting wct. (principal contractor)

Pls suggest

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2016 If material is included service tax applicable only on labour portion see the Rule.
Yes TDS will be 2% including materials.

Querist : Anonymous

Querist : Anonymous (Querist)

11 August 2016 it is a lumsum amt, we can't seperate

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2016 Then service tax at 15% payable on 40% in case of original work and 70% on other than original work.

Querist : Anonymous

Querist : Anonymous (Querist)

11 August 2016 sir one more thing about WCT, we do not need the Wct for our sub contractor ? being cut by principal contractor

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2016 Check with your sub contractor if he is covered under WCT then you have to deduct.

Querist : Anonymous

Querist : Anonymous (Querist)

11 August 2016 Sir,

If principal or client is deducting the WCT, and giving form something 49 then it is ok

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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03 August 2025 Here’s a clear summary based on your queries about service tax, TDS, and WCT on work contracts involving labour and materials (as per the regime before GST):

1. Service Tax on Site Work (Labour)
Service Tax Rate: 15% (includes basic service tax + cesses).

As per Rule 2A of Service Tax (Determination of Valuation) Rules, when material is supplied along with labour, service tax is applicable only on the labour portion.

2. If materials are included and amount is lump sum
If you cannot separate labour and material costs in a lump sum contract:

Service tax is payable on a notional percentage of the contract value:

40% for original works (e.g., construction of a building)

70% for works other than original works (e.g., repairs, maintenance)

3. TDS (Tax Deducted at Source)
If you pay a lump sum to your vendor (covering labour + materials), TDS is to be deducted at 2% under Section 194C (works contract payments).

This applies regardless of whether the vendor is a subcontractor or not.

4. WCT (Works Contract Tax)
If the principal contractor (your client) is deducting WCT and issuing you Form 16 or 16A, you generally need not deduct WCT from your subcontractor.

However, if your subcontractor is liable for WCT, and no deduction has been made by the principal contractor, you might need to deduct it when paying your subcontractor.

It's advisable to check your subcontractor’s WCT coverage and certificate.

Summary
Aspect Tax Rate / Rule
Service Tax 15% on labour portion (Rule 2A)
Lump Sum Contract 40% (original works) / 70% (other works) on total value for service tax calculation
TDS on Payment 2% under Section 194C
WCT Deduction Usually by principal contractor; check subcontractor status

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