service tax on stiching charges of bags

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bhushan gupta (Querist)
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18 June 2009 Mr. A is engaged in stiching contract with B company exporting rice.The Detail of the contract is as follows:
a)All the material and equipment required for the stiching of bags will be of Mr. A.
b) B company would pay amount on per bag basis.

Now, total amount of the payment from B exceeds Rs.10lacs in a financial year.Whether A is required to registered with Service Tax , and charge service tax on the billing of stiching to B?

Please substantiate the answer with the mentioning of relevant notification no. and details

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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18 June 2009 This activity would fall under Business Auxiliary service- production/ processing for or on behalf of the client but excluded as activities of manufacture are not covered and converting cloth into bag is certainly a manufacturing activity. The possible implications on central excise if the value ( including materials) were to exceed Rs. 150 lakhs maybe examined.

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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18 June 2009 if services is given on export in my opinion no service tax is applicable you will read properly

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