Do We Need to Pay Panchayat Tax for Contract Labor in Rural Tamil Nadu? Seeking Advice

As we are the contractor, we engaged contract labor for work in a rural area. In this case, we paid a security deposit along with the license fee and obtained a CLRA license and ISMW license, respectively.

Panchayat Tax Inquiry

On this note, we are asked to pay panchayat tax to the local president of the panchayat for engaging contract labor in their area. Do we really have to pay any panchayat tax? If so, are there any provisions or statutory liabilities stated in the Tamil Nadu Panchayat Act? If so, please share the details and provide advice on this matter.

Thanks in advance.

As far as I know, the Contract Labor (Regulation & Abolition) Act, 1970 is the only act dealing with the issuance of a license for engaging contract labor in any activity analogous to industrial activity and the collection of license fees fixed under the respective rules by the appropriate government. I have not heard of the local Panchayat collecting any fees or charges in this regard.

It might be better to ask the President to quote the relevant authority.

Dear Colleague,

The Contract Labour R&A Act

The Contract Labour R&A Act is a special enactment under which a license is issued to the contractor upon payment of a certain fee. The purpose of the Act is to regulate the working conditions, safety, and other facilities of the contract workers, which are inspected by the licensing authority from time to time.

Professional Tax

Regarding Professional Tax, it is a tax to the local body that needs to be paid on behalf of the employees who are engaged in a particular Village Panchayat under the provisions of the Profession Tax Act, prevailing in a few states (not all states). This tax applies to all kinds of professions, trades, and employment, and is levied based on the income derived from such profession, trade, or employment. It is imposed on employees, individuals carrying on business, including freelancers and professionals, based on income exceeding any monetary threshold. Both the employer and employees are required to pay this tax to the local body, making it obligatory for both the contractor and the workers.

I recommend reading the article on Profession Tax available at: https://cleartax.in/s/professional-tax

All the Best, God bless,

Dr. P. Sivakumar
Doctor Siva Global HR
Tamil Nadu

Demand for Payment of Panchayat Tax

Is there any demand for payment of the said tax in writing? If so, you may seek the relevant information, especially regarding the authority of the law for exacting the tax, under the provisions of the RTI Act. No tax is leviable save with the authority of the law. The Panchayat is not a legislative body.

Thank you so much for your prompt response. In continuation, we had insisted on paying commercial building tax for our workmen's camp. As part of welfare compliance, we had rented land from a tenant and constructed a temporary fabricated shed for our workmen. We are paying monthly rent to the landowners based on our mutual agreements. The Panchayat president is now asking for permission to construct, and he insists on paying commercial building tax for our workmen's shed. Do we really have to pay according to any provision or clause? Please advise.

Thanks & Regards,
John Peter.S