All That You Need To Know About Labour GST Rate in India
Table of Contents: Labour GST Rate
Services had a distinct connotation before India implemented the Goods and Services Tax (GST), but in order to tax them, the government had to define the term “service” in a way that made sense. Therefore, to prevent any lawsuits or extra expenses, it is important to comprehend the HSN code, GST on labour charges, and its effects on such transactions. In this blog, we will examine the applicability of Labour GST Rate in India.
GST Applied to Labour Costs
There is no precise definition of “labour GST rate” in the GST Law. As a result, the same has to be understood in everyday language. According to popular belief, labour contracts are contracts in which the contractor provides labour to complete the tasks outlined in the agreement in exchange for payment. In certain instances, the provision of labour is complemented by the provision of materials, for example, the provision of paint and labour for painting tasks.
Labour Charges GST Rate: Indian Context
Let’s learn more about the labour services exempt from GST and subject to head labour taxes.
Work contracts: A service falls under this category if the provider provides labour (hired from outside) and their own supplies, like sand, steel, cement, and other materials. The service in question is the provision of labour and materials.
For example, a contract for the construction, improvement, modification, maintenance, erection, installation, fitting out, building, development, repair, fabrication, completion, renovation, etc.
Pure Labour Contract: A service falls under this category if the recipient provides the materials and the supplier exclusively provides hired labour from outside the company. The provision of exclusively hired labour is the service in question.
Labour charges HSN code and GST rate
The labour HSN code and GST rate are as follows:
| Service Accounting code | Nature of service | GST rate for labour charges |
| 998511 | Executive/retained personnel search services | 18% |
| 998512 | Permanent placement services | 18% |
| 998513 | Contract Staffing Services | 18% |
| 998515 | Long- Term staffing or payroll services | 18% |
| 998516 | Temporary staffing-to-permanent placement services | 18% |
| 998517 | Co-employment staffing services | 18% |
| 998518 | Other employment and labour supply services nowhere else classified | 18% |
Even the construction labour GST rate is 18%
Employment Services GST Rate
Labour service GST rate are subject to an 18% Goods and Services Tax rate. These services include executive or retained personnel search services, contract staffing offerings, co-employment staffing solutions, permanent placement services (barring executive searches), long-term staffing (payrolling) services, temporary staffing to permanent placement services, co-employment staffing services, and other employment and labour supply services not otherwise mentioned.
GST labour charge exemptions in India
In some circumstances, labour charges are exempt from GST. Construction, erection, commissioning, and other similar services done under a pure labour contract are covered under these exemptions. The two scenarios are as follows:
- This exemption applies whether building a stand-alone home or a single unit inside a residential development.
- GST is not applied to labour costs related to building, remodelling, or repair under government programs like Housing for All and Pradhan Mantri Awas Yojana.
GST and Reverse Charge on Labour Charges
The service provider will be responsible for paying GST on reverse charges on the hired charges paid to the labour if unregistered users use the outside hired labour.
There won’t be a reverse fee if the outside-hired labour is obtained via accredited agencies. The provider must pay labour GST rate to the registered agency to obtain labour.
GST Valuation
- As stated in Section 15 of the CGST Act, the transaction value is the value of the provision of goods or services.
- When the price is the only consideration for a supply, and there is no relationship between the seller and the recipient, the transaction value is the price that is paid or payable for that supply.
- Any taxes, tariffs, cesses, fees, and charges imposed by any currently enacted law—aside from GST—must be included in the value of the supply.
- The Labour work GST rate will be considered taxable value.
- If a labour supplier is required to pay any taxes, such as ESI, EPF, or other levies, the relevant amount will be included in the transaction value, and labour GST rate will be applied to the total amount.
Lawgical Adda will be pleased to help you in the calculation and processing of your organization’s labour GST charges. Get in touch with us now!
FAQ
How is the GST Rate for Labor Charges determined?
The GST Act states that the transactional value is the supply value when calculating the GST on labour charges. Except CGST, IGST, and SGST, all costs, levies, and taxes imposed under various statutory legislation are included in this transactional value. At first, the person receiving the service bears certain costs instead of the person providing the labour. The overall supply value for these services must be increased, and the following formula is used to determine the GST rate on labour charges:
The base labour supply GST rate amount is ₹100.
A 10% service fee of 100 rupees
EPF- ₹12
ESI- ₹4.75
In total: ₹126.75
The total payment is subject to GST at ₹22.8 (126.75*18%).
Is labour charge GST 18% or 12%?
Pure labour contracts are categorised under HSN codes 998511 through 998518 and are subject to an 18% labour GST rate. The GST applies to the transactional value, or the total worth of the supply, which includes labour costs and any additional taxes such as ESI and EPF.
What is the labour charge for RCM under GST?
If labour supply or workforce supply services provided by a workforce supply agency are subject to SAC 98519 and 18% taxation. The agency that supplies the workforce must pay this levy.
Does GST apply to labour charges as well?
Labour charges in India are subject to labour gst rate. Manpower services can be used for enterprises or on an individual basis. These can include manual labour-intensive jobs like driving, housework, construction, and data entry, among others.
