Service tax applicability

Queries 604 views 2 replies

CA.Nilesh Birkodikar

Chartered Accountant

30 Points Joined February 2009

One of my clients receives ayurvedic medicine powder from principal provider. Which my client fills in capsules packs these capsules in foil. My client charges his fee for this work. Someone please advise me whether this activity is taxable service?

But any process amounting manufacture or production is covered under 17 activities mentioned in negative list (point number f). In that case is filling medicine into capsules and coating these capsules in foil amounts to manufacture? If so then there is no service tax on this activity? It may be noted that principal provider is SSI unit under central excise hence does not pay duty on final product.

Replies (2)

Dipjyoti Majumdar

CA in service & CS. dipmaj@

3488 Points Joined June 2011

Nilesh

If the activity amounts to manufacture as per excise law then there is no service tax, as you have rightly pointed out. If not there is service tax. You may have to examine the centarl excise tariff to find out if the activity is classified as manufacture. If not, it will fall within the category of business auxiliary service. This is my opinion.

Regards,

Manoj Agarwal

Service Tax Consultant Rourkela Service

3456 Points Joined March 2012

If the process carried out amouts to manufacture or production of goods, then certainly the same is covered under Negative List. The same process can not be subjected to excise duty and service tax, which are mutually exclusive.

However, seems that your client may be engaged in intermediate production process as job worker. If so, then the Entry No.30(c) of Mega Exempion N/N - 25/2012 might be relevant.

30. Carrying out an intermediate production process as job work in relation to -

agriculture, printing or textile processing;
cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act ,1985 (5 of 1986);
any goods on which appropriate duty is payable by the principal manufacturer; or
processes of electroplating, zinc plating, anodizing, heat treatment, powder coating, painting including spray painting or auto black, during the course of manufacture of parts of cycles or sewing machines upto an aggregate value of taxable service of the specified processes of one hundred and fifty lakh rupees in a financial year subject to the condition that such aggregate value had not exceeded one hundred and fifty lakh rupees during the preceding financial year;

2(b) “appropriate duty” means duty payable on manufacture or production under a Central Act or a State Act, but shall not include ‘Nil’ rate of duty or duty wholly exempt;