Service tax on fabrication work
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
16 March 2013
A mfg. company has sold plastic sheets & done fabrication work on the requirement of client. fabrication includes cutting & Counter hole.No prior such activity has been operated in the company. Consideration of fabrication is Rs. 3.0 lacs & invoice has been issued for the same. Pls advice, Whether service tax applicable in due course?
Querist : Anonymous
Querist :
Anonymous
(Querist)
19 March 2013
Dear Experts, pls suggest me whether any tax liability should be levy on fabrication work. How it should be appear in Gujarat CST Return.
24 July 2025
Regarding **service tax on fabrication work** like cutting and counter hole on plastic sheets sold by the manufacturer, here’s the detailed position:
---
### 1. Is Service Tax applicable on Fabrication work?
* **If fabrication is done as a separate service and charged separately** (for example, cutting, drilling, shaping done on client’s materials), **service tax is leviable on the fabrication service**.
* The relevant service category is usually **Business Auxiliary Services (BAS)** for "production or processing of goods for or on behalf of clients."
* If the fabrication service is bundled with the sale of goods (plastic sheets), then the nature of transaction determines taxability:
* If the **fabrication and sale of goods are inseparable** and the entire activity is considered a **sale of goods**, then **service tax may not be applicable** (sale of goods is outside service tax ambit).
* If fabrication is a **service over and above sale**, service tax will be applicable on the **service portion**.
---
### 2. Valuation for Service Tax on Fabrication
* If materials are **provided by the client** (free issue materials), service tax is charged on **60% of the gross amount charged** (including value of free issue materials).
* If you supply the materials as well, the **service tax may not apply on the fabrication**, since it could be treated as sale of goods.
* But if you **separately charge for fabrication service**, service tax applies on that amount.
---
### 3. How to report in CST Return (Gujarat)?
* Fabrication work involving sale of goods is **subject to VAT/CST**.
* Service tax and CST are **different taxes on different bases**.
* If you have charged **service tax on fabrication**, then that portion is not reported in CST return, since CST is on sale of goods.
* Only the **value of goods (plastic sheets)** is reported in CST return.
* Service tax collected should be deposited separately and reported in **service tax returns**.
---
### 4. Summary:
| Scenario | Tax Liability |
| --------------------------------------------------------- | ---------------------------------------------------- |
| Fabrication on client materials (charged separately) | Service Tax (BAS) applicable on service portion |
| Sale of fabricated goods (no separate service charge) | CST/VAT applicable on entire amount; no service tax |
| Fabrication + sale bundled but service charged separately | Service tax on service portion; CST on goods portion |
---
### Suggestion:
* If you want to avoid confusion, issue **separate invoices** for sale of plastic sheets and for fabrication service.
* Maintain proper valuation breakup.
* File service tax returns for fabrication service.
* Report goods sale in CST return.
---
If you want, I can help draft a sample invoice or suggest further compliance steps based on your scenario. Would that help?
---
### 1. Is Service Tax applicable on Fabrication work?
* **If fabrication is done as a separate service and charged separately** (for example, cutting, drilling, shaping done on client’s materials), **service tax is leviable on the fabrication service**.
* The relevant service category is usually **Business Auxiliary Services (BAS)** for "production or processing of goods for or on behalf of clients."
* If the fabrication service is bundled with the sale of goods (plastic sheets), then the nature of transaction determines taxability:
* If the **fabrication and sale of goods are inseparable** and the entire activity is considered a **sale of goods**, then **service tax may not be applicable** (sale of goods is outside service tax ambit).
* If fabrication is a **service over and above sale**, service tax will be applicable on the **service portion**.
---
### 2. Valuation for Service Tax on Fabrication
* If materials are **provided by the client** (free issue materials), service tax is charged on **60% of the gross amount charged** (including value of free issue materials).
* If you supply the materials as well, the **service tax may not apply on the fabrication**, since it could be treated as sale of goods.
* But if you **separately charge for fabrication service**, service tax applies on that amount.
---
### 3. How to report in CST Return (Gujarat)?
* Fabrication work involving sale of goods is **subject to VAT/CST**.
* Service tax and CST are **different taxes on different bases**.
* If you have charged **service tax on fabrication**, then that portion is not reported in CST return, since CST is on sale of goods.
* Only the **value of goods (plastic sheets)** is reported in CST return.
* Service tax collected should be deposited separately and reported in **service tax returns**.
---
### 4. Summary:
| Scenario | Tax Liability |
| --------------------------------------------------------- | ---------------------------------------------------- |
| Fabrication on client materials (charged separately) | Service Tax (BAS) applicable on service portion |
| Sale of fabricated goods (no separate service charge) | CST/VAT applicable on entire amount; no service tax |
| Fabrication + sale bundled but service charged separately | Service tax on service portion; CST on goods portion |
---
### Suggestion:
* If you want to avoid confusion, issue **separate invoices** for sale of plastic sheets and for fabrication service.
* Maintain proper valuation breakup.
* File service tax returns for fabrication service.
* Report goods sale in CST return.
---
If you want, I can help draft a sample invoice or suggest further compliance steps based on your scenario. Would that help?
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