Get GST Insights on labour charges, contracts & HSN codes. Stay ahead with Vakilsearch's expert led guide on exemptions and tax credits on labour services.
GST on Labour Charges refers to the taxation of services provided by laborers or contractors, which generally attract 18% GST, unless exempted. Construction services under government schemes and affordable housing projects are included in key exemptions.
To remain compliant and manage costs efficiently in the Indian construction and service sector, businesses must understand GST on labor charges. A variety of labor services can be taxed based on the applicable HSN codes and exemptions.
What is the GST on Labour Services?
Labour services in India generally attract 18% GST. However, certain services, such as pure labor for construction under government schemes or affordable housing projects, are GST exempt. Below is a table of applicable GST rates for labor services:
|
Service Category |
GST Rate | HSN Code |
| Construction services under government schemes | 0% | 9954 |
| Contract labor for other general services | 18% | 9985 |
| Services related to agriculture or irrigation | 0% | 9986 |
Having a clear understanding of these rates ensures compliance and clarity in the taxation of labor-related services.
Step By Step Guide To Calculate Labour Charges GST
- Identify the GST rate: Labour services generally attract 18% GST, unless exempt.
- Determine the taxable value: Calculate the total value of labor services provided.
- Apply the GST formula:
GST Amount=Taxable Value×100/GST Rate
Example: If the labor charges are ₹50,000 and GST is 18%, the calculation will be:
GST Amount=50,000×18100=₹9,000\text{GST Amount} = 50,000 \times \frac{18}{100} = ₹9,000GST Amount=50,000×10018=₹9,000
- Add GST to the taxable value: Total = Taxable Value + GST Amount.
In this case, ₹50,000 + ₹9,000 = ₹59,000.
GST Exemption on Labour Services
Certain labour services are GST exempt, including:
- Pure labour services for construction under government or local authority projects (e.g., affordable housing schemes).
- Labour services related to education and healthcare institutions.
- Services for agricultural operations, such as irrigation or land preparation.
- Construction services under projects funded by government welfare programs.
These exemptions aim to support essential sectors and reduce the tax burden on critical public services.
Labour Services With 0% GST
Below is a table of labour services with 0% GST:
|
Service Category |
GST Rate | HSN Code |
| Pure labour services under government housing schemes | 0% | 9954 |
| Labour for irrigation, water supply, and agriculture | 0% | 9986 |
| Construction services for educational institutions | 0% | 9954 |
| Services related to healthcare facilities | 0% | 9985 |
These exemptions apply to essential and public welfare-oriented services, ensuring affordability and accessibility.
Pre & Post Labour Charges GST Changes
The implementation of GST brought uniformity to the taxation of labour services, replacing multiple taxes like service tax and VAT. Before GST, labour services were taxed differently depending on the state or service category, leading to inconsistencies. Post-GST, a standard rate of 18% applies to most labour services, with specific exemptions for essential sectors.
| Aspect | Pre-GST | Post-GST |
| Tax Structure | Service Tax/VAT varied by state | Uniform GST at 18% |
| Exemptions | Limited exemptions | Broader exemptions for welfare projects |
| Compliance | Complex, multi-tax system | Simplified single tax regime |
FAQs About GST on Labour Charges
What is the HSN code for labor charges?
The HSN code for labor charges depends on the type of service. For construction services, it is 9954, while general labor services are classified under 9985 or 9986 for agriculture-related services.
Is GST on labour charges 12% or 18%?
GST on labour charges is generally 18%, except for exempt services such as pure labor for government housing schemes or agriculture-related services, which attract 0% GST. The 12% rate is not applicable to labor charges.
