Supply of skilled labour to jewellary manufacturing unit

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Harish P.Shetty (Querist)
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11 January 2014 Sir

Supply of skilled labour to jewellary manufacturing unit attracts serivce tax.

Said unit is under negative list - said units undertake the labour works of the branded jewellary manufacture

@VaibhavJ

@VaibhavJ (Expert)
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11 January 2014 Hi

Since it is Input Service for them & hence it is taxble.

Thanks

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Harish P.Shetty

Harish P.Shetty (Querist)
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11 January 2014 Sir

said unit is having 4 to 5 Labour contractors on department vise i.e design depr, wax department, Setting department etc.

all are within the range of Rupees 10 Lakh p.a.

Is there any problem for the unit or labour suppliers

thanks in advance

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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26 July 2025 Here’s a detailed take on the **supply of skilled labour to a jewellery manufacturing unit** under Service Tax law (pre-GST era):

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### 1. **Is supply of skilled labour taxable?**

* Yes, supply of **skilled labour services** to a business is generally a **taxable service** under Service Tax.
* The jewellery manufacturing unit receiving such services will pay Service Tax on the service portion.

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### 2. **Jewellery manufacturing unit under Negative List**

* The **negative list under Service Tax** (Section 66D) exempts certain services.
* However, **manufacturing units themselves are not exempt from paying Service Tax on input services** they receive.
* Labour supply to such units is **taxable as service**, not exempt merely because the unit is under negative list.

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### 3. **Multiple labour contractors for different departments**

* Having multiple labour contractors (for design, wax, setting, etc.) each with turnover below ₹10 Lakh per annum:

* **Each contractor's turnover matters individually for registration.**
* If turnover < ₹10 Lakh, they may not be required to register under Service Tax.
* However, the **recipient (jewellery unit) is liable to pay Service Tax under reverse charge if the supplier is unregistered** (if applicable under RCM rules at that time).

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### 4. **Potential issues for the unit or labour suppliers**

| Party | Issue |
| --------------- | ------------------------------------------------------------------------------------------------- |
| Labour Supplier | May not need to register if turnover < ₹10 Lakh, but cannot charge Service Tax |
| Jewellery Unit | May have to pay Service Tax under reverse charge on services received from unregistered suppliers |

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### 5. **Summary**

| Aspect | Comment |
| ------------------------------------------- | ---------------------------------------------------------------- |
| Supply of skilled labour | Taxable service under Service Tax |
| Jewellery unit under Negative List | No exemption for input services, must pay applicable Service Tax |
| Labour contractors with < ₹10 Lakh turnover | May be unregistered, recipient may pay tax under reverse charge |

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If you want, I can help draft a compliance note or clarify reverse charge implications in detail. Would that be helpful?

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