Dear sirs; my question is "if a contractor gets the reimbursement of P.F. amount of the workers from the company, then will service tax applicable on that? regards
From India, Haryana
globaloverseas144
46
Soical compliance auditing

Dear Bipin,
If contractor is paying PF or reimbursement of PF of workers from company then no service tax is applicable.PF is a legal deposited amount and hence no service provided in this amount only administrative/other charges are applicable.
Same case in ESI.
Best Regards
Global Overseas-Delhi office

From India, Delhi
one of my friends is a labor contractor, recently during the service tax assessment by the inspector he was asked to pay, sum of Rs. 5 lacs as (service tax+penalty) on the amount of P.F. he has charged separately from the company towards employers share of P.F. contribution. Is it correct? If so under which section can i seek the relevant information?
From India, Haryana
Madhu.T.K
3451
Industrial Relations and Labour Laws

Normally the contractor will bill the principal employer on actual salaries paid to his employees engaged for the principal employer plus the contributions he pays on that wages towards ESI, EPF, Welfare Fund etc, plus monthly element of statutory bonus payable by him and the service charge. The Service Tax is calculated at the applicable rate (10.3%) on the sum total of the charges, ie, wages+ statutory contributions and payments+ his service charges (means his own take as contractor). If your practice is to bill only wages part and then collect the statutory payments separately, then the Service Tax authority's demand is correct because in your bill you have only mentioned the payouts to workers. It should have been the total cost to contractor that is recovered from the principal employer that is subject to service tax. Now it has become the contractor's liability to pay the service tax. Had it been billed on gross, he could have collected it from the Principal employer.

Regards,

Madhu.T.K

From India, Kannur
globaloverseas144
46
Soical compliance auditing

Dear Bipin,
If contractor raised a separate invoice for PF/ESI amount from the principle employer then service tax is liable to pay by contractor itself.
Here PF inspector is right .
Please do make changes in invoice/bill,you can reduce your penalty,discuss in mail with us.

From India, Delhi
Dear Sir,
My self Pragnesh patel,
As per above discussion our company contractor raised separate bill of PF remembrance and contract employees salary bill, in this case what is company's responsibility regard separate service tax on PF remembrance ?
Regards,
Pragnesh Patel
7405507747

From India, Ahmadabad
pon1965
603
construction

A Contractor is billing to the principal employer for the supply of manpower at X rates. The X should have the component of PF also and the profit of Contractor. Then, on the X amount, he also charges the employer @ 12.36% towards service tax. Hence, the contractor is liable to pay service tax.
Pon

From India, Lucknow
Dear Sir,
Our company contractor give us two bill at every month one is current month manpower supply bill with service tax (12.36%) & he was also give us last month PF remembrance bill with 12.36% service charges. I.g. in the month of March 2014 company contractor gave us bill of manpower service for the month of Feb 14 & Pf remembrance bill of Jan 2014.
Sir my question is Pf is totally statutory liability of company and company also paid both part of pf to contractor (first in bill of monthly manpower (12%) & second one is PF remembrance bill (13.61%) then why company pay twice service charges ??
Please tell me is this right as per legal laws?
Regards
Pragnesh Patel

From India, Ahmadabad
dlal890 service
Dear Sir,

I am working in Railway and we are awarding cleanliness contract which are mainly labour oriented contracts. In such type of contracts service tax is an statutory component which is to be calculated on labour component.
As concern to labour component it includes following three parts :-
(i) Minimum wages applicable as notified by Govt.
(ii) ESI (Employess State Insurance)
(iii) EPF ( Employees Provident Fund)

There are following two concepts for calculating service tax on labour component :-
(a) In some departments service on labour component is being calculated on the sum of Minimum wages and ESI only and EPF is not counted as EPF amount is refundable amount.
(b) Whereas in some departments service tax is calculated on sum of minimum wages, ESI & EPF.

I want to know what is exact rule for calculation of service whether it will calculated on sum of minimum wages & ESI only or on the sum of minimum wages, ESI & EPF. If there is any circular of concerned ministry on the matter the same may please be also quoted.

Regards

Devi Lal

From India, Delhi
Madhu.T.K
3451
Industrial Relations and Labour Laws

The thread was started in 2011 and hence the service tax rates quoted is not the one applicable now. It has increased and is 14.5% now. It is to be paid by the Principal employer on the total bill value which will obviously be the total cost to the contractor plus his service charges which will be around 8.33% of the total payout by way of wages, ESI, PF etc. If the Contractor is a company (private limited or public limited) then the service tax will also be included in the bill and paid by the contractor whereas if the contractor is a proprietor or partnership kind of organisation, then he will not show it in the bill but he will only show what is the amount due to him from the Principal employer, ie, the wages, PF/ESI etc and the service charges. The Principal employer will have to pay 14.5% of the invoice amount as service tax. In both the cases the burden/ cost is on the principal employer and is calculated on the total amount payable to the contractor.
Madhu.T.K

From India, Kannur
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