New GST on Labour Charges in India
Labour plays a critical role in industries like construction, manufacturing, electrical works, fabrication, and more. Whether you’re hiring skilled or unskilled workers, it’s important to know how GST applies to labour services. In this blog, we explain the gst on labour charges, when it applies, and what the applicable rates are.
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for common labour/service categories (no compensation cess).
New GST Rate on Labour Services in India
| Type of Labour Service | New GST Rate | Remarks |
|---|---|---|
| Pure labour (residential construction) | 0% | Exempt only for notified schemes (e.g., PMAY) and strictly “pure labour” (no materials) |
| Job work (manufacturing/processing) | 5% or 18% | Two-rate framework: 5% (restricted ITC, as notified) or 18% (with ITC). “12%” slab discontinued |
| Contractual labour (security, housekeeping) | 18% | Includes manpower supply agencies; RCM applicability unchanged where notified |
| Works contract services | 18% | Composite supply of labour + materials; standard rate continues at 18% with ITC |
Are Labour Charges Taxable Under GST?
Yes, labour charges are taxable under GST — but it depends on the nature of service provided.
GST applies when:
- The labour is provided along with a supply of goods or service (like a construction contract).
- Labour is hired under a contractual agreement through a contractor.
- Services fall under works contract or job work categories.
If it’s a simple wage paid to an individual (not as a service provider), GST does not apply.
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Old GST Rates for Labour Services
(Old GST Rates – Applicable Until 21st September)
| Type of Labour Service | GST Rate | Remarks |
|---|---|---|
| Pure labour (residential construction) | 0% | Exempt under specific government schemes |
| Job work (manufacturing/processing) | 12% or 18% | Depends on the type of goods being handled |
| Contractual labour (security, housekeeping) | 18% | Includes manpower supply agencies |
| Works contract services | 18% | Labour plus material combined services |
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What is Job Work Under GST?
Job work refers to any processing or working on goods owned by another registered person. This includes:
- Fabrication
- Polishing
- Painting
- Assembling
The gst on labour in job work is typically 12% if the job work is done on goods other than jewelry, textiles, or food. In certain cases, the rate may be 18%.
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GST on Labour for Construction Work
- Pure labour used in the construction of low-cost housing under government schemes is exempt from GST.
- If labour is provided along with materials (like cement, bricks), it becomes a works contract and attracts 18% GST.
- So, if you’re only hiring manpower, GST may not apply. But if it’s a contracted service, it likely will.
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Input Tax Credit on Labour Services
Businesses hiring labour contractors and paying GST on their services can claim Input Tax Credit if:
- The services are used in the course of business.
- The supplier provides a valid tax invoice.
- GST is properly charged and reported.
This helps reduce the business’s overall GST liability.
GST Registration for Labour Contractors
If a labour contractor’s annual turnover exceeds ₹20 lakh (₹10 lakh in special category states), GST registration is mandatory. Once registered, they must:
- Collect and pay GST
- File regular returns
- Provide GST-compliant invoices
I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.
Frequently Asked Questions
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Is GST on labour charges always applicable?No, GST is not applicable on pure manual labour without a service contract. It depends on the nature of service.
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What is the GST for labour charges on construction sites?If included in a works contract, GST is 18%. For pure labour in government housing schemes, it may be exempt.
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Do individual labourers need to register for GST?No, only contractors or service providers need to register if their turnover exceeds the GST threshold.
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What's the GST on fabrication or polishing services?These are treated as job work and attract 12% or 18% GST, depending on the goods involved.
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Can a company claim ITC on labour services?Yes, if the labour services are used for business and GST is properly invoiced, Input Tax Credit (ITC) can be claimed.