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Rcm on labor waork.

Saudagar K (accounts) (64 Points)

21 April 2016

Dear SIr,

i recived invoice on Rs.155000/- ( type of work : Lobor charges for cutting Pipeline flushing work done) and vendor submitt the decleration letter for "NIL Services Tax" bcaz annual turnover is approx 4Lac.

now i wnt to know RCM is applicable, if yes to who will pay RCM,

compnay pay RCM from out pocket or compny will deduct RCM from vendors payment and pay to RCM liability.

Thanks in Advance !!!

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13 Replies

CA Narender Lamba (ACA) (109 Points)
Replied 21 April 2016

compnay pay RCM from out pocket, after payment company book the credit .

purshotam vohra (CA IPCC) (138 Points)
Replied 21 April 2016

RCM not applicable as nature of work is only labour contract.

Saroj Rout (CA FINAL) (120 Points)
Replied 21 April 2016

Before examining the RCM applicabilty first make sure that , the service received by the company by way of "labour supply for cutting Pipeline flushing work " Since the work is specified and it is being done by the labour force, it will not be covered under Manpower service . A service will be get covered under manpower service only when the provider of service has supplied manpower and the supervision and control is lies with the Service receiver.

If it is manpower service , service receiver need to pay service tax under RCM even though the service receiver is a small service provider .

Saudagar K (accounts) (64 Points)
Replied 21 April 2016

have any notification for this ???

Saudagar K (accounts) (64 Points)
Replied 21 April 2016

this is not a manpower service, its pure labor charge work .

Swamy (Article) (116 Points)
Replied 22 April 2016

So it may come under works contract RCM liability will be 50%

Swamy (Article) (116 Points)
Replied 22 April 2016

So it may come under works contract RCM liability will be 50%

purshotam vohra (CA IPCC) (138 Points)
Replied 22 April 2016

The works involved here is only labour and doesnt include any material component. It neither gets covered under works contract nor supply of manpower. There is no requirement of RCM.

Saudagar K (accounts) (64 Points)
Replied 22 April 2016

Dear Purshotam Sir,

have any notification for same ??

Saroj Rout (CA FINAL) (120 Points)
Replied 22 April 2016

Pl refer Rule 2 (g) of Service tax Rule 1994 inserted wef 01.07.2012 vide notification no 36/2012 ST

purshotam vohra (CA IPCC) (138 Points)
Replied 23 April 2016

The definition of works contract itself includes that contract is said to be as works contract only if it includes provision of service as well as supply of material which is subject to VAT. In your case, as there is no question of supply of material by the service provider. Thus RCM will not apply. Moreover RCM in case of works contractor applies only when person who is receiving the service is body corporate.

ANIL GOEL (Finance Professional) (27 Points)
Replied 23 April 2016

RCM not applicable.Mr. Sanjay Rout and Mr. Purshotam Vohra explained the matter very well.

Saroj Rout (CA FINAL) (120 Points)
Replied 23 April 2016

Mr. Anil Goel, from the very beginning i am saying ,No RCM will be applicable for the service “Labor charges for cutting Pipeline flushing work”

RCM will not be applicable because the said service is not covered under manpower supply service. Why the service will not be a manpower supply service that thing only I have pointed out by referring Rule 2 (g) of service tax rule vide notification no 36/2012.

There will be no question of covering the service under works contract service not because there is no provision of material as well as with service. This need be studied with definition of works contract as “works contract” means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation.