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Rcm-manpower

Rakesh hegde (Audit Consultant) (81 Points)

07 September 2013  

Hi all,

Is RCM under manpower  will applicable only if service provider(Individual) should be registered under "Manpower & Recruting Agency"???


 13 Replies

Sumit Grover (Chartered Accountant ) (3647 Points)
Replied 07 September 2013

No.... The provider whthr registered or not..... The rcm provisions shall apply so far the servicees are rendered to d body corporate by indiviual, firm, etc.
1 Like

Rakesh hegde (Audit Consultant) (81 Points)
Replied 10 September 2013

Dear sumit sir 

 I still in a confusion,

Fact of the case: Our client is a manufacturer of sofa & office furnitures. Client is  receiving labors from local carpentry(there nature of service is carpentry work) workers who is specialized in sofa , furniture manufacturing & designing. But they do work in either our client factory or client customer site according to   the requirement of our client. 

Issue: Our client is receiving Invoice in terms of number of furnitures they manufactured not according to number of labors the supplied.

So is this service will fall under manpowr supply??? If Yes please share with me strong evidence to prove that it is a manpower supply and our client has to remit 75% ST to govt.

Thanks .

  

CA girl (Article Trainee-CA Final)   (1942 Points)
Replied 10 September 2013

Hey if your client is not receiving invoices with details of the manpower/labour supplied then it does not come under the purview of Man Power Supply for the purpose of RCM.

1 Like

Rakesh hegde (Audit Consultant) (81 Points)
Replied 10 September 2013

Miss Divya i agree to your sugestion.

But there may be a case that, the supplier is a individual and unregistered service provider, then he didnt charge service tax on the invoice itself.

But as per RCM (manpower)service receiver has to remit 75% of ST (calculated on actual value) to govt.  

We cant escape from ST department by telling we didn't receive invoice as per prescribed format.

we have to be in a safer place. 

 

CA girl (Article Trainee-CA Final)   (1942 Points)
Replied 10 September 2013

Hey, Service provider not charging service tax is a totally different scenario...ya in that case the service receiver cannot escape his liability. But in this case the nature of the service that your client is receiving looks more like a labour contract...the individual labourers will work for the service provider who inturn gives a invoice with just the breakup of the work done and not the labour bill for each of the labourers involved....Labour contract and man power supply are two different things altogether and if it is a labour contract then it does not attract RCM.

1 Like

Rakesh hegde (Audit Consultant) (81 Points)
Replied 10 September 2013

Ok now i got the point. Thanks a lot divya.

CA girl (Article Trainee-CA Final)   (1942 Points)
Replied 13 September 2013

Hey, Please go through the following article with examples of case laws to better understand the solution to your question.

 

/articles/work-carried-out-on-lump-sum-basis-is-not-supply-of-manpower-18352.asp#.UjL3rdKBkg4

1 Like

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com)   (3456 Points)
Replied 13 September 2013

If i correctly understand your query, you mean (i) your client is a manufacturer of furniture, (ii) Your client has engaged various Karigar's who perform the actual work either at there own premises,or at your clients premises or at your clients customers premises.

 

Here, there is absolutely no question of supply of manpower. Each karigar is working in there individual capacity with your client on contractual basis and they raise invoice and charge on per item basis as mutually agreed. They all can separately avail basic exemption of Rs. 10 lacs vide NN-33/2012. 

1 Like

Rakesh hegde (Audit Consultant) (81 Points)
Replied 14 September 2013

Thank you all . So manpower will not attract . Later i found that the above mentioned service provider is registered under work contract category.

Is it fall under RCM under work contract? and Service receiver have to remit 50% of service tax to govt?

CA girl (Article Trainee-CA Final)   (1942 Points)
Replied 14 September 2013

  • Hey ,the works contract under RCM would mean Material cum labour contract. Pure labour contract alone would not attract RCM..To make it more clear...the service provider would have charged service tax on a particular value of the contract and VAT on another value of the contract(70% labour and 40% materials etc).This kind of contracts only attract RCM. However the service receiver is still liable for his share of service tax liability even if the provider is not charging the same in the invoice.

 

  • So, if the contract is of the above nature your client has to pay 50% of the ST(Effectively comes to 2.472%) to the government.

PET (Manager) (32 Points)
Replied 23 November 2016

1) A Person himself providing service to Company under supervision of Company. Will it comes under RCM, However company is showing it as Other Professional fees. I have a doubt that here the Worker is raising invoice and claiming payment. There is no other Vendor involved.

 

2) Also there is a scenario where after Retirement, that person is again employed in the company and raising bill. Will RCM apply ?

Sunil Kumar (Indirect Taxation ) (1246 Points)
Replied 23 November 2016

NO RCM would be applicable. The definition of supply of manpower under Service Tax Rules 1994 define this service as under:

(g)   "supply of manpower" means supply of manpower, temporarily or otherwise, to another person to work under his superintendence or control.]

If superintendence or control not availble with the transferor, then the service cannot be called as supply of manpower. Therfore no question of RCM. 

In both of the above case the RCM would not apply.The case either be called as profesional service or employement.

Regards 

Sunil Kumar (Indirect Taxation ) (1246 Points)
Replied 23 November 2016

Further, It is needless to mention that service provided by the employee under employment is not cover in the definition of service as defined under section 65B (44) of Finance Act 1994.

Regards 


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