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Labour contract v/s manpower supply

uma.. (CA FINAL)     03 June 2013

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Hello Friends, please explain difference between labour contract and manpower supply. Also difference in terms of service tax to be paid or charged.

Minakshi Agarwal (Student CA Final )     03 June 2013

Minakshi Agarwal
Student CA Final  
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Supply of manpower means supply of manpower , temporarily or otherwise ,to another person to work under his superintendence or control, whereas labour contractor are the ones who does the work independently by using his own skills and expertise and are not guided by the principal employer.

In case of manpower supply services, the service reciever is liable to pay service tax on 75% of the value, if the service provider is individual, HUF, partnership firms, proprietary firms or an AOP and service reciever is incoporated as body corporate located in taxable territory. The service provider is liable to pay service tax on balance 25%. 

Whereas in case of labour contract, service provider is liable to pay service tax on full value @ 12.36%.

Further there can also be a case of CONTRACT LABOUR where the labour works under the control of the contractor and principal employer has no control over the labour. This service is not for "supply of manpower" and is not taxable.


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Ritesh khurana (CA student)     07 March 2014

Ritesh khurana
CA student 
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Hello Meenakshi Agarwal 

Thanks for your post 

My queries related to this are following 

1. Labour contractor can enjoy threshhold limit of Rs 10 lakh ?

2. in which code  labour contractor will register themselves while applying for ST- 1


Thanks and Regards 

Ritesh khurana 





Minakshi Agarwal (Student CA Final )     07 March 2014

Minakshi Agarwal
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Yes labour contractor can enjoy threhhold limit of Rs.10 lakhs.

Labour Contractor needs to get themselve registered under the head "Business Auxiliary Service".



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Rishabh kanodia (Student)     23 May 2016

Rishabh kanodia
 24 points

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Its urgent had a heated agruement with my partner on what minakshi ji said
plz forward me the documented supporting
soo i can proof him and save my ass
Rishabh Kanodia 

George Nelson (Finance Professional)     23 January 2017

George Nelson
Finance Professional 
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Manpower is the prime driving force behind any successful venture. It is the availability of quality manpower at a reasonable price that often determines the profitability and success of a business.

Terms And Conditions

Nature of relationship

The very nature of the relationship between a company and the contractor needs to be highlighted. The relationship between the Contractor with the Company is of an Independent Contractor and not that of an Employer- Employee or Principal-Agent.

Nature of work

It is of importance to define the tasks to be performed by the workmen. The exact type of work to be done by the workmen shall be mentioned in detail, including the sub processes that make up the whole work.

Notice period

The contractor usually needs some time to arrange the manpower required for a particular order. The number of days of notice to be given to the contractor for making arrangements of the manpower shall be specified under this.

It may also be mentioned that in the event of non supply of the same, the company shall be making arrangements from other third parties for which the costs will be recovered from the contractor.


Transportation is one of the most important aspects of manpower supply. It shall be specified whether the transport of workmen to the factory or workplace shall be the responsibility of the company or the contractor. Usually it is the contractor who makes arrangement of such transportation.

Reserve manpower

It is vital to make the contractor ensure that the specified number of workmen are present through the duration of the work mentioned in the contract. The contractor should also be made to maintain adequate number of workmen in reserve to fill in the gaps in the event of any absenteeism.

Quality of manpower

It is important that the workmen should be of sound health, both physically and mentally, in order to carry out the work allotted to them. The company may demand the contractor to produce medical certificates for any worker, if required. The age of the workers is also important. Ideally it should be mentioned as not to be less than 21 and not more than 55 years.


The contractor may be relieved from the responsibility to supervise the work done by the workmen. In this case, the supervision shall be carried out by the company through its representatives while the workmen shall be bound to follow the directions given to them.

Alternatively, the contractor may be made to appoint a supervisor who shall be responsible to make the workmen carry out the instructions given by the company. And the remuneration for the supervisor shall be paid by the contractor.


The rates at which the contractor agrees to supply workmen to the company shall be listed. The charges may be on a monthly, weekly, daily or hourly basis.

The list shall also contain the type of the manpower- for instance, skilled, semi skilled; unskilled or specific type of manpower like Security guards, plumbers, carpenters, housekeepers among others.

A Manpower Supply Contract should ideally be a tool to promote hassle free supply of manpower and uninterrupted flow of processes at a work site. Precise drafting of such a contract can avoid many a possible dispute since managing human resources can prove to be a complicated affair.

Recruitment Services


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