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Service tax (reverse charge): labour work

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hiten

Mgr

24 Points Posted on 05 December 2012

A company gets electric installation work done. The vendor (individual/partnership) issues only labour bill. Is company liable to pay service tax on labour charges under reverse charge? Will the service falls under works contract or manpower supply or any other category?

As per my understanding since the vendor is charging only for labour, the service will not fall under works contract, since works contract implies supply of material + labour.

Similarily above work is not a contract for supply of manpower but a contract for work, so manpower supply shall also not apply.

Apart from above is company still liable to pay service tax? For your opinion.

Replies (1)

Priyanka Maheshwari

Assistant Manager

76 Points Posted on 08 December 2012

Your observations are correct. It is not a work contract as no transfer of property in material is involved. To classify it under manpower supply the most important thing to be considered is whether the person is directly under your control, since control here primarily comes through wages, hence, it is not a manpower supply. In my opinion, it does not fall under any category of reverse charge and is a pure service on which you are required to pay 12.36% of service tax to the vendor if charged by him.