service tax on fabrication
This query is : Resolved
08 September 2009
Service tax is payable on Erection, commissioning or installation of plant,machinery or euipments.
is service tax payable on fabrication?
The activity of fabrication is a pre-stage of erection. The item is first fabricated then its erected and installed.
is service tax payable on fabrication?
The activity of fabrication is a pre-stage of erection. The item is first fabricated then its erected and installed.
08 September 2009
I guess it should on fabri also. pelase cross check i am not sure
09 September 2009
Dear Mr Ramesh,
Meaning of Fabrication means Building of machines and structures and other equipments by cutting, shaping and assembling components made from raw materials.
If you are fabricating and selling the end product, according to me, there is no service tax.
However, if those products are erected, installed or commissioned, then on the services rendered in connection with such erection, installation and commissioning alone are chargeable to service tax, in line with Section 65 (39a.
Thanks.
Sarathy
Meaning of Fabrication means Building of machines and structures and other equipments by cutting, shaping and assembling components made from raw materials.
If you are fabricating and selling the end product, according to me, there is no service tax.
However, if those products are erected, installed or commissioned, then on the services rendered in connection with such erection, installation and commissioning alone are chargeable to service tax, in line with Section 65 (39a.
Thanks.
Sarathy
09 September 2009
Dear Mr. Sarathy
i'm agreed with your quotes. Since I didn't find any clear guidelines on this issue so i've a little doubt that if such end product is movable then it may attract S/tax.
i'm agreed with your quotes. Since I didn't find any clear guidelines on this issue so i've a little doubt that if such end product is movable then it may attract S/tax.
24 July 2025
Hi! On the issue of **service tax on fabrication**, here’s the clarity based on your discussion and prevailing service tax rules (pre-GST era):
---
### 1. What is Fabrication?
* Fabrication involves **cutting, shaping, assembling components** from raw materials to build machines, structures, or equipment.
* It is essentially a **manufacturing activity**, producing a tangible movable product.
### 2. Service Tax Applicability
* Service tax was levied on **Erection, Commissioning, Installation** of plant, machinery, and equipment (Section 65(39a) of the Finance Act, 1994).
* **Fabrication**, being a manufacturing/pre-assembly process, is generally **not considered a taxable service** under service tax law.
* If the fabrication results in **sale of goods**, it is treated as **sale of goods (manufacturing)** and not a service. Hence, no service tax is charged on fabrication alone.
* **However**, once the fabricated goods are **erected, installed or commissioned**, the service tax is applicable on those services, i.e., on erection/installation charges.
---
### 3. Key Points
* Fabrication activity by itself = **No service tax** (treated as manufacture/sale of goods).
* Fabrication + Erection/Installation = Service tax applies **only on erection/installation** charges.
* If the fabricated product is movable and sold as goods, service tax does not apply.
* If the contract is a composite contract covering both fabrication and erection, tax is charged **only on the erection part**.
---
### 4. Example:
* A company fabricates steel structures and sells them = No service tax.
* If the same company erects and installs those structures at site = Service tax applicable on erection service charges.
---
### Conclusion:
You are correct — **fabrication itself is not subject to service tax**. Service tax applies only on erection, commissioning, or installation services.
---
If you want, I can help draft a clear note or summary for your records or client communication on this topic. Would you like that?
---
### 1. What is Fabrication?
* Fabrication involves **cutting, shaping, assembling components** from raw materials to build machines, structures, or equipment.
* It is essentially a **manufacturing activity**, producing a tangible movable product.
### 2. Service Tax Applicability
* Service tax was levied on **Erection, Commissioning, Installation** of plant, machinery, and equipment (Section 65(39a) of the Finance Act, 1994).
* **Fabrication**, being a manufacturing/pre-assembly process, is generally **not considered a taxable service** under service tax law.
* If the fabrication results in **sale of goods**, it is treated as **sale of goods (manufacturing)** and not a service. Hence, no service tax is charged on fabrication alone.
* **However**, once the fabricated goods are **erected, installed or commissioned**, the service tax is applicable on those services, i.e., on erection/installation charges.
---
### 3. Key Points
* Fabrication activity by itself = **No service tax** (treated as manufacture/sale of goods).
* Fabrication + Erection/Installation = Service tax applies **only on erection/installation** charges.
* If the fabricated product is movable and sold as goods, service tax does not apply.
* If the contract is a composite contract covering both fabrication and erection, tax is charged **only on the erection part**.
---
### 4. Example:
* A company fabricates steel structures and sells them = No service tax.
* If the same company erects and installs those structures at site = Service tax applicable on erection service charges.
---
### Conclusion:
You are correct — **fabrication itself is not subject to service tax**. Service tax applies only on erection, commissioning, or installation services.
---
If you want, I can help draft a clear note or summary for your records or client communication on this topic. Would you like that?
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