Exemptions Available to Pure Labour Service Under the GST Law

Introduction

The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. It has replaced all other types of indirect taxes applicable to goods and services in India. However, certain goods and services are exempted from GST, and one such service is the service of pure labour.

What is a Service of Pure Labour?

A service of pure labour, also known as a pure labour contract, is a contract where the supplier of service does not utilize any material in supplying the service. It is essentially a labour-only contract. The rate of tax in case of pure labour services is 18%.

Exemptions Available to Pure Labour Service

The GST law provides certain exemptions to pure labour services. These exemptions are provided under Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017. The following services of pure labour contract are exempted from GST:

1. Services of construction /erection /commissioning /installation /completion /fitting out /repair /maintenance /renovation or alteration of a civil structure or any other Original works pertaining to the beneficiary led individual house construction or enhancement under the housing for all (urban) mission or Pradhan Mantri Awas Yojana.

2. Services of construction/erection/commissioning or installation of Original works pertaining to a ‘Single residential unit’ otherwise than as a part of a Residential complex.

Other Exemptions Where Portion of Goods Do Not Exceed 25%

In addition to the exemptions available to pure labour services, the GST law also provides exemptions to Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said Composite supply. This exemption is provided under entry at Sr.No.3A of the Notification No.12/2017 Central Tax (Rate) dated 28-06-2017.

The exemption is applicable to the supply provided to the Central Government, State Government or Union territory or Local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Circular No. 206/18/2023-GST-

6. Whether supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017.

6.1 Public parks in government residential colonies, government offices and other public areas are developed and maintained by CPWD.

6.2 Maintenance of community assets, urban forestry, protection of the environment and promotion of ecological aspects are functions entrusted to Panchayats and Municipalities under Article 243G and 243W read with Sr. No. 29 of 11th Schedule and Sr. No. 8 of 12th Schedule of the constitution.

6.3 Sr. No. 3 and 3A of notification No. 12/2017-CTR exempt pure services and Composite supply of goods and services in which value of goods does not constitute more than 25%, that are provided to the Central Government, State Government or Union territory or Local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

6.4 Accordingly, it is clarified that supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017.

Conclusion

The GST law provides certain exemptions to pure labour services and other services where the portion of goods do not exceed 25% of the total value of the supply. These exemptions are aimed at reducing the tax burden on essential services and supporting specific sectors. However, it is important for service providers to understand these exemptions and apply them correctly to avail the benefits.