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Service tax on in-house job work contract payment

BHAVIN SHAH (FINANCE MANAGER) (38 Points)

01 December 2010

I am the job work contractor and i received a job work contract in a manufacturing unit. I received Rs.2.50 per K.G. production and for that 10 workers are done the work on behalf of me at the premises of the contractee. All workers are on my pay roll here when i issued my monthly invoice to the contractee, here service tax are applicable to me.

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4 Replies

Ganesh (CA) (111 Points)
Replied 01 December 2010

Dear Bhavin Shah,

If the production as mentioned by you amounts to manufacture as per Excise on which excise duty is payable, then there is no Service Tax Liability. If not, I feel the said scenario would attract Service Tax under Business Auxiliary Service.

Thanks,

Ganesh

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 01 December 2010

The actual job process would be important to determine whether the same is manufacture or deemed manufacture. Once it amounts to manufacture there wouldbe no liability for sure whether the same is leviable to excise duty or not.

If not manufacture the exemption 14/2005 exempts certain processes in relation to printing, agriculture and textiles.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 01 December 2010

On the face of it, Service Tax is payable, as the job worker is not producing excisable goods. If however, the principal manufacturer is using the processed goods for manufacture of excisable goods, exemption under Notification 8/2005-ST is available.