Service tax applicable or not ?

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Querist : Anonymous

Querist : Anonymous (Querist)

30 May 2013 Mr. A is in receipt of Jobwork income which exceed Rs.10 lac from manufacturing of Gold Ornaments. It is purly a LABOUR Income(i.e. Mr.A received pure Gold and returns Ornamets manufactured from Gold received). whether service tax is applicable or not ?

Thanks in advance.

Rupesh Jain

Rupesh Jain (Expert)
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30 May 2013 YES SERVIC TAX APPLICABLE

Querist : Anonymous

Querist : Anonymous (Querist)

30 May 2013 whether under works contract or business auxillary service ? and what is the reason though it is a manufacturing activity.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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24 July 2025 Regarding your query on whether service tax is applicable on job work income exceeding Rs. 10 lakh for manufacturing gold ornaments (pure labor income where gold is supplied and finished ornaments are returned):

Is Service Tax Applicable?
Yes, service tax is applicable on such job work income.

Under Which Category?
The activity of converting raw gold into gold ornaments for a job work contractor is considered a Works Contract Service under service tax law.

Even though it is a manufacturing activity, since the service provider is doing the job work on materials supplied by the client and charging only for labor, it falls under the Works Contract Service definition.

Alternatively, it could be classified as Business Auxiliary Service, but usually the Works Contract Service classification is applied for manufacturing activities involving processing of goods supplied by the client.

Why Service Tax is Applicable Despite Manufacturing?
Service tax is levied on services rendered.

In job work where only labor is provided on materials supplied, the value of service is considered as the labor charges, which attract service tax under Works Contract Service.

The raw material (gold) is not the service; only the process/labor component is taxable.

Notification(s) and case laws have clarified that job work in manufacturing (when raw material is supplied) is taxable under service tax.

Summary:
Aspect Detail
Nature of activity Job work (manufacturing gold ornaments)
Tax category Works Contract Service (likely)
Tax applicability Yes, if turnover > Rs. 10 lakh
Reason Service component (labor) is taxable

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