Labour Charges HSN Code and GST Rates in India

Ordinary staffing services classified under heading 9985 attract 18% GST under the applicable support-services rate entry. This covers the ordinary contract and temporary staffing examples above. Check whether any specific provision applies to the actual service before issuing the invoice. A SAC identifies the type of service; the GST rate comes from the applicable rate entry.

Assume a GST-registered staffing agency charges a customer Rs. 1,00,000 for a taxable contract staffing service. At an assumed applicable GST rate of 18%, the GST is Rs. 18,000 and the invoice total is Rs. 1,18,000.

The example assumes that Rs. 1,00,000 is the taxable value and that no adjustment changes it. The invoice must show the appropriate central and state GST or integrated GST for the transaction.

No single rate applies to every service described as labour. Job work and repair services have their own classifications and rate entries.

CBIC has clarified that job work and other manufacturing services performed on goods owned by another person must be distinguished when applying the rate entries. Do not apply the staffing rate to job work simply because the supplier charges for labour.

SAC 998714 covers maintenance and repair services of transport machinery and equipment. A garage undertaking a vehicle repair should examine this repair-service entry, even if its bill separately displays the mechanic’s labour charge. The CBIC rate schedule lists a general 18% entry for maintenance and repair services under heading 9987, subject to its stated exceptions.

Consider two transactions. A garage agrees to repair a customer’s vehicle, so the customer buys a repair service. A staffing agency agrees to provide mechanics to the garage, so the garage buys a staffing service. Where a repair invoice also includes parts, review the transaction and invoicing treatment rather than assuming that every line must use the labour-service SAC.

A supplier of services generally needs GST registration when its aggregate turnover exceeds Rs. 20 lakh in a financial year. The threshold is Rs. 10 lakh in Manipur, Mizoram, Nagaland and Tripura. Aggregate turnover is assessed across India, and compulsory-registration provisions or specific exemptions must also be checked. The Rs. 40 lakh threshold associated with certain suppliers of goods is not the general threshold for labour services.

CBIC registration guidance also explains that eligible small suppliers of taxable services can retain the applicable threshold exemption when making inter-State supplies, subject to the applicable conditions. A contractor should check its complete activities and registration position before assuming that one inter-State service contract requires registration.

Identify the service promised to the customer, then check its classification and rate. This process creates a record that can be reconciled with the contract and GST return:

• Read the agreement and describe the deliverable: personnel supplied, repairs completed, goods processed or another service.
• Compare that description with the CBIC scheme of classification for services.
• Check the matching entry and conditions in the CBIC GST rates schedule.
• Confirm the supplier’s registration position, taxable value and tax treatment for the transaction.
• Keep the agreement, work records, invoice and return information consistent.

A code is part of accurate reporting, but it does not establish the GST rate or input tax credit eligibility on its own.

A contractor may have to pay workers before its customer settles an invoice. A garage may also need parts or equipment while meeting its payroll. After estimating those payments and the timing of customer receipts, the business can assess whether it has a funding gap.

For an established business that meets the applicable eligibility criteria, a Bajaj Finance Business Loan can help fund working capital, equipment, expansion, or digitisation. Loan amounts range from Rs. 2 lakh to Rs. 80 lakh, with repayment tenures from 12 months to 96 months, subject to business loan eligibility and applicable terms. loan amount, inclusive of applicable taxes. 

• Visit the Business Loan page and select “Check Loan Offer”. Enter your mobile number and complete one-time password (OTP) verification.
• Provide personal and business details, including applicable identification and banking information.
• Enter the required loan amount and select the applicable loan variant.
• Select the repayment tenure.
• Review the information and submit the application.