Calculation of Service Charge – Odisha Finance Department Clarification (OGFR 2023)
CALCULATION OF SERVICE CHARGE – ODISHA FINANCE DEPT
Clarification under Rule 264(iv) of Odisha General Financial Rules (OGFR), 2023
Issuing AuthorityFinance Department, Govt. of Odisha
Letter No.FIN-COD-MISC-0013-2023
Signed ByAnil Kumar Purohit, Joint Secretary
SubjectCalculation of Service Charge
Important Clarification: The Finance Department has issued a clarification to address divergent methodologies being adopted across departments for computing service charges under OGFR 2023. It clarifies whether the employee's contribution toward EPF and ESI should be factored into the service charge calculation.
Base for Calculation
Wage/Salary
Includes EPF & ESI (Employee Share)
Excluded from Base
Employer Share
+ Applicable Taxes
Rule Reference
Rule 264(iv)
Note-2, OGFR 2023
GST TDS
2%
If value exceeds ₹2.50 Lakh
Key Clarifications in the Letter
- Inclusion in Base: Service charges shall be computed on the wage/salary component, which includes the employee's contribution to EPF and ESI.
- Exclusion from Base: Employer statutory contributions and applicable taxes shall be excluded from this base and added subsequently.
- Rule Basis: This clarification is issued pursuant to Note-2 under Rule 264(iv) of the Odisha General Financial Rules (OGFR), 2023.
- Annexure-A: A component-wise calculation sheet along with detailed instructions is enclosed for ready reference.
- Strict Compliance: All procuring authorities are requested to circulate these guidelines among their administrative control for strict compliance and future reference.
Additional Instructions (Annexure)
- Illustrative Calculation: The calculation provided is illustrative only. Actual statutory contributions towards EPF/ESI shall be calculated on the applicable statutory wage base and in accordance with prevailing EPF/ESI provisions.
- GST Taxable Value: Shall be determined in accordance with Section 15 of the CGST/OGST Acts and applicable valuation provisions, having regard to the terms and conditions of the contract.
- TDS under GST: As per Section 51 of the GST Acts, Procuring Authority making payments where total value under a single contract exceeds ₹2.50 lakh are required to deduct tax at source (1% CGST + 1% SGST, or 2% IGST).
- Statutory Compliance: Valid challans and proof of deposit for both employee and employer shares of EPF and ESI must be furnished along with monthly bills.
- Tax Split: Split total GST equally into CGST (9%) and SGST (9%) for intra-state supplies, or apply IGST (18%) for inter-state supplies.
- Verification: Ensure valid GSTIN, wage sheets, and tax invoices are furnished by the service provider before final disbursement.
What This Means for Procuring Authorities
- Uniform Methodology: All departments must now follow a single, uniform method for calculating service charges, eliminating confusion.
- EPF/ESI Employee Share: When calculating service charges, include the employee's EPF and ESI contributions as part of the salary base.
- Employer Share Excluded: Do not include employer contributions or taxes in the base calculation. Add them separately.
- TDS Compliance: Ensure 2% GST TDS is deducted for contracts exceeding ₹2.50 lakh and deposited online.
- Documentation: Verify all statutory challans, wage sheets, and tax invoices before making disbursements.
Frequently Asked Questions
What is this Odisha Finance Department letter about?
The letter clarifies the methodology for calculating service charges under Rule 264(iv) of the Odisha General Financial Rules (OGFR), 2023, specifically addressing whether EPF and ESI employee contributions should be included in the base.
Should employee EPF and ESI contributions be included in service charge calculation?
Yes. The Finance Department has clarified that service charges shall be computed on the wage/salary component, which includes the employee's contribution to EPF and ESI.
What should be excluded from the base calculation?
Employer statutory contributions and applicable taxes shall be excluded from the base and added subsequently.
What is the GST TDS rule mentioned in the letter?
As per Section 51 of the GST Acts, Procuring Authorities must deduct TDS (1% CGST + 1% SGST, or 2% IGST) for payments where the total value under a single contract exceeds ₹2.50 lakh.
What documents must be furnished with monthly bills?
Valid challans and proof of deposit for both employee and employer shares of EPF and ESI must be furnished along with monthly bills.
Where can I download the official letter?
You can download the PDF using the "Download Letter PDF" button above, or visit the official Finance Department website at finance.odisha.gov.in.
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