Applicability of GST for Labour hired through a Labour Supplier, Goods and Services Tax - GST

[Suryanarayan Rajendrababu]

Would appreciate if we get a suitable guidance and clarification to a situation that we are facing presently regarding understanding the applicability of GST. In order to explain our issue, wish to elaborate as follows:

1. We are into execution of a Project a site which involves Erection and Commissioning of a solar power project.

2. We have been engaged by our Customer to carry out the said work. This involves we hiring labours supplied by a Labour Supplier Firm. They have a registered GST along with ESI and PF too. Now, the following typical working which we wish to list out to understand what would be the basis of computing GST payable:

(a) The Labours would be paid as per minimum wages = ₹ 450/-.

(b) ESI would be aound 4% on this which is payable.

(c) PF would be @ 12% plus 12% (Total 24%).

(d) Service charge payable to the Labour supplier is 10%, which we presume should be on ₹ 450/- and should not include the items under (b) and ( c) above.

(e) Finally once they Invoice us, the 18% GST (guess the rate is correct) payable should be on ₹ 450 + 10% (18% on ₹ 500/-) or should it include the total of ESI and PF payable too ?

(f) Further in such a case TDS deductible should be on which amount ?

We would be highly grateful if a clarity / guidance is given to us at the earliest please.

Thanking you all in advance..

Posts / Replies

[Himansu Sekhar]

It will include pf ,esi and any other charges. Pl. Refer sec. 15 of cgst Act 2017

[Ganeshan Kalyani]

The invoice to be raised by labour supplier will have ESIC & PF component as well. Any incidental charges to provide service will form part of consideration. Hence, both the said component will be added to the bill.

[Ganeshan Kalyani]

TDS will be deducted on the invoice value before GST.

[KASTURI SETHI]

(1) Manpower Supply services fall under Chapter/ Heading No. 9985 ( Sub-heading No. 998511 to 19). Rate of tax is 18% Serial No.23 (iii) of Notification No.11/17-CT(Rate) dated 28.6.17 as amended).

(2) No deduction is allowed from transaction value (except CGST/SGST/IGST/Cess under this Act) as advised by both experts.

(3) Regarding last query pertaining to GST Act (Not for Income Tax Act purpose), pl. note as under :

No TDS on GST and no GST on TDS

[KASTURI SETHI]

9985 Support services

99851 Employment services including personnel search/referral service and labour supply service

This group includes personnel search/referral service and labour supply service; provision of labour services to clients through a variety of types of contracts like Contract staffing services, Temporary staffing services, Long-term staffing (payrolling) services, Temporary staffing-to-permanent placement services, and Co-employment staffing services

998511 Executive/retained search services

This service code includes

i. provision of intermediation services between prospective employees and employers;

ii. specialized search and recruitment service limited to filling highly paid executive, senior manager, and professional positions, according to client specifications, including conducting detailed interviews with the client organization’s management team, developing job profiles, conducting original research and advertising to locate potential job candidates, screening possible candidates, preparing, presenting, and discussing a confidential list of highly qualified applicants with the client, making interview arrangements, negotiating compensation, and providing post-hire follow-up

Note : The prospective employee/client makes the decision as to which candidate to hire. The fee for the services provided is charged whether or not the candidate is hired. This service is also known as retained search.

998512 Permanent placement services, other than executive search services

This service code includes

i. testing, interviewing, reference checking, evaluation and counselling of prospective employees;

ii. recruiting, selecting and referring candidates to the client to fill positions on a permanent (indeterminate) basis;

iii. booking and casting services for motion picture, television and other theatrical casting services

Note : The services may be procured by the potential employer or by the prospective employee. The candidate is selected and hired by the prospective employer. The placement firm is paid on a contingency basis, i.e., only for successful placement of a candidate. This service code includes permanent placement services for a complete range of occupations from low-level employees to management employees, including executives, except those recruited through executive/retained search, and for domestic or international job placements.

998513 Contract staffing services

This service code includes finding individual contractors to fill positions on the basis of written contracts that stipulate the deliverables for which the client has contracted, as well as specific terms and conditions of employment

Note : Under the terms of this agreement, the service provider has legal rights and duties with respect to the individual contractors. The individual contractors are normally responsible for their own payroll deductions and government filings.

998514 Temporary staffing services

This service code includes supplying personnel for temporary work assignments

Note : The temporary staffing firm hires its own employees and assigns/supplies them to clients to support or supplement the client’s workforce in work situations such as employee absences, temporary skill shortages, seasonal workloads, and special assignments and projects. The employees are on the payroll of the temporary staffing firm which is legally responsible for their actions, but when working they are under the direct supervision of the client. The temporary staffing firm specifies the pay, benefits, etc. of the employee.

998515 Long-term staffing (payrolling) services

This service code includes supplying personnel for extended work assignments

Note : Under the terms of this arrangement, the client may recruit the person or persons hired by the staffing firm and assigned to their place of work, or transfer a portion of their existing workforce to the staffing firm. Long-term employees are placed on the payroll of the staffing firm, which is legally responsible for their actions, but when working they are supervised by the client. This service includes labour leasing, staff leasing, employee leasing, extended employee staffing and payrolling. The services of Professional Employer Organizations (PEO’s) are not included.

This service code does not include payroll processing services, cf. 998223

998516 Temporary staffing-to-permanent placement services

This service code includes supplying of personnel for temporary employment with the expectation of permanent work at the end of a trial period with the client

Note : The employee remains on the payroll of the temporary help staffing firm until the hiring decision is made at which time he or she becomes an employee of the client or, if not, returns to the temporary help staffing firm. This service may include training, counselling, assessment, and resume upgrading.

998517 Co-employment staffing services

This service code includes supplying of personnel through a staffing arrangement in which an organization, i.e. a Professional Employer Organization (PEO), co-employs a client’s workforce.

Note : The PEO and the client enter into a contractual agreement whereby the rights and responsibilities in respect of co-employees are shared or allocated, with the service provider assuming responsibility for certain activities as agreed with the client. These range from basic to full-service packages.

998519 Other employment & labour supply services n.e.c.