A labour contractor cooperative has been agreed to supply man power as per requisition of principal employeer. Pricipal employeer will pay wages as per minimum wages Act of W Bengal and production linked incentive to labour contractor per employee. labour contractor will get 2.5% service charges on total wages paid for the month. in this perticular case whether labour contractor will be levied service tax? if yes why and which amout i.e. gross amount or service charges.
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The service of this nature would fall under the category of 'Manpower recruitment and supply agency' which includes the service of supply of manpower, temporarily or otherwise. The levy would be applicable on the gross amount.
In general labor contractors are the actual employers and provide the labor on contract basis to the company. Therefore, you need to pay service tax gross amount including wages. However, if you satisfy that the you are acting as a pure agent, you need to pay service tax only on 2.5% received as service charges.
Your case falls under the category of manpoower recruitment or supply agencies services an subjected to attract service tax on gross amount
If construction company appoint a small contractor for painiting or plastering etc and contractor him self arrange labour : labour are under the supervision of contractor and principal has no supervision or control over the labor
then still it covered under the man power supply.
Thanks in advance