The Rajasthan Authority of Advance Ruling (AAR) has ruled that 18% Goods and Service Tax (GST) is payable on labour service at construction work.
The bench of Utkarsha and Dr. Akhedan Charan has observed that prima facie it appears that subcontract made by contractor does not change the basic nature of nature of original contract with the employer therefore it appears that exemption available by way of above notification of intra-state supply of services under Pradhan Mantri Awas Yojana (PMAY) should be available to sub-contractor i.e. M/s Build Layer Constructions.
The Applicant entered into an Agreement to provide the pure labor Construction Services to M/s BCM BUILDERS LIP (Agreement attached). M/S BCM Builders LIP has entered into a contract with Rajasthan Government to construct 380 flats under “Affordable Housing Scheme under Pradhan Mantri Awas Yojana (including Material and Labor). Henceforth, BCM Builders L.L.P has entered into a sub contract with the Applicant to receive “Pure Labor Services” for the project.
Scope of Work for the Applicant includes all the Labor related work for construction of flats. The applicant will have all the control over Labor and will be responsible for their dues and concerns. As per the agreement, the Applicant will not be responsible for any material related work and all the material is to be directly provided by BCM Builders LLP to the Applicant.
The applicant sought the advance ruling on the issue whether the entry number 10 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 is applicable on the services of “Pure Labor” provided by the applicant?
Yet another issue raised was if the entry number 10 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable, then what will be classification and HSN for these services of “Pure Labor” provided by the applicant?
The AAR held that labour service at construction work fall under HSN code 9954 with GST rate 18%.
Ruling Details
Applicant’s Name: M/S Build Layer Constructions
Ruling Date: 23.05.2025
