Understanding Service Tax on Labor Contractor Bills: Are We Doing It Right?

Inquiry About Labor Contractor Billing and Taxation

Please advise me regarding the issue below. We engage registered labor contractors to work in our factory. We take an average of 450 contract manpower from the contractor on a daily basis to work in the production process. At the time of billing, we pay minimum wages for the number of man-days, 13.61% PF, 4.75% ESI, service charge, and on the gross bill, we pay a service tax of 12.36%. They submit quarterly returns to excise officials. Is this correct?

Does the company need to pay service tax on the labor contract bill (gross bill)? Does the company need to pay the security service contractor bill? Please correct me if I am wrong.

Regards,
Sripad.K

If we engage contract workers for our use, all expenses should be borne by us only. Service tax should be paid for the entire amount in the bill, which is correct. You will reclaim the service tax that you paid. The contract workers should submit challans every three months. For any service that you avail, they have to pay service tax because we are engaging them, and we have to pay the service tax, which is the current practice.

I hope this clarifies your doubts.

Regards,
Eswar.K
Manager-HR

Thank you for explaining it to me briefly. How can we reclaim the service tax that we have paid?

Regards,
Sripad.K

It is certain and understood that our lawyer, who is handling our IT returns, will take care of our reimbursement of service tax. However, the question arises: is there a specific period within which a company can claim its deducted service tax amount?

Another query: what happens if a company doesn't pay service tax? What if the company is generating four invoices per month but only pays the service tax for two invoices? Will the service tax amount for the remaining two invoices be absorbed by the company? In such a scenario, what consequences could the company face, especially considering that it has already claimed service tax from its principal employer for all four invoices?

URGENT

Regards,
Viren Sanghvi

We are a private limited company providing manpower (courier boys) to companies. I would like to know how much service tax we should charge on the bill. For example, if the bill amount is Rs. 1000 and the service tax is 12.36%, the tax amount would be Rs. 123.60.

I am interested in understanding the percentage of service tax we should include in our billing.

Thanks

Regards,
Rajendra