“Labour charges” covers a wide range of work — from supplying workers to a factory, to stitching garments on a contract, to providing masons on a construction site. Under GST these are all services, but they do not all share the same SAC code or rate. Picking the right classification is what keeps your labour invoice compliant.
First, identify what you are actually supplying
The correct treatment turns on the nature of the labour:
| What you supply | Typical SAC | Notes |
|---|---|---|
| Pure manpower / labour supply | 9985 | You provide workers; the recipient directs them |
| Job work (processing others’ goods) | 9988 | Rate varies by sector (textiles, engineering, etc.) |
| Construction / works-contract labour | 9954 | Building and civil works |
The word “labour” on your bill is not enough — HSN/SAC classification looks at the substance of the service.
Pure labour vs works contract
A crucial distinction under GST:
- Pure labour contract — you supply only labour/service; the material is provided by the recipient. This is a supply of service (often SAC 9985 or the relevant service code).
- Works contract — you supply both material and labour as a composite supply (for example, building a wall using your own cement and bricks). This is a works contract under SAC 9954 and is taxed as a service, usually at 18% (with concessional rates for specified projects).
Getting this wrong changes both the SAC code and the rate, so be clear which one you are billing.
The GST rate on labour charges
As a general rule, manpower supply and most labour services are taxed at 18%. But there are important exceptions:
- Job work — 5% or 12% for many notified sectors (e.g. certain textile and engineering job work), 18% for residual job work.
- Construction/works contracts — generally 18%, with concessional rates for affordable housing and specified government works.
- Pure labour on specified government or low-cost housing projects — may be exempt under specific notifications.
Because the rate depends on the exact service, always confirm it against the HSN/SAC code finder and current notifications.
Reverse charge on some labour services
Watch out for reverse charge (RCM) in two common labour situations:
- Security services supplied by a non-body-corporate to a registered person — the recipient pays GST.
- Manpower/labour supplied by an unregistered person to a registered person in specified cases.
Where RCM applies, the supplier issues the bill without charging GST, and the registered recipient pays the tax directly to the government.
What a labour charges invoice must contain
A compliant labour invoice includes:
- Supplier’s name, address and GSTIN
- Recipient’s name, address and GSTIN (if registered)
- A unique invoice number and date
- Description of the work done (e.g. “Stitching charges for 500 shirts” or “Masonry labour, July 2026”)
- The correct SAC code
- Number of workers / man-days or quantity, where relevant
- Taxable value
- GST breakup — CGST + SGST or IGST — or a note that tax is payable under RCM
- Total amount
A quick example
A contractor supplies 20 labourers for a month of factory work at ₹50,000 total, forward charge, intra-state:
- Taxable value: ₹50,000
- SAC: 9985
- GST @ 18% (9% CGST + 9% SGST): ₹9,000
- Invoice total: ₹59,000
The bottom line
There is no single “labour charges” code — classify by substance: manpower supply (9985), job work (9988) or works contract (9954), and apply the rate that goes with it. Check whether reverse charge applies, especially for security and unregistered supply, and always show the SAC on the bill.
Not sure which code fits your work? Use the free HSN & SAC code finder to confirm, then raise the invoice in seconds with the RaiseBill Bill Maker.