Service tax applicability on contractor

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Ashish Pareek (Querist)
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13 October 2012 Dear Sir,

As per Notification No. 30/2012 - Serrvice Tax Dated 20/06/2012

In Table, Point Number Stated that "IN RESPECT OF SERVICE PROVIDED OR AGREED TO BE PROVIDED IN SERVICE PORTION IN EXCECUTION OF WORKS CONTRACT"
Whether Some of our Member units are engage in manufacturing of textile fabrics through various contract work. these contracts are based on per meter rate or per machine rate of following activities: -
1. Machine Wise Contract
2. Warping
3. Mending
4. Drawing
5. Dropping
6. Grading
7. Cutting
8. Packing
9. Sampling
10.Loading & unloading

In all these processess, contract is given to some other person to complete the work in as much as these units do not appoint any labour or worker to do the work. All supervision & control is of contractor. In most of the cases our member units are giving contract as per meter basis or per machine basis. Manpower or labour may be particular number short or excess

Please clarify whether in these circumstances service tax is apllicable of not. If applicable , who is liabhle to deposit the service tax

or is service tax is applicable on contract & the contract amount is less than 10 Lac Rs. in all totalling than what to do please clarify.

CA Suresh Jain

CA Suresh Jain (Expert)
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14 October 2012 1. None of the service mentioned by you comes under the category or "works contract" service and hence not taxable as works contract serrvice.

2. the service provided is also not a provision for supply of man power and hence not taxable as man power supply service

3. the service is a Job work service and has to be dealt with as such.

As per negative list any process amounting to manufacture or production of goods is not a service. Now you have to analyse the activities mentioned by you in the light of this.

Apart from above entry of negative list mega exemption notification exempts Carrying out an intermediate production process as job work in relation to textile processing; in view of this activities from sr. 2 to sr. 9 mentioned by you falls under textile processing and hence not taxable.

Activity 1 is not clear to me and hence not able to comment. Activity mentioned by you at sr. 9 is taxable. The small serrvice provider notification if applicable can be availed.

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