Service tax on manufacture of jewelry

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Hi,

 

I am thinking of starting a diamond and gold jewelry shop. However, initially to reduce overheads, i am planning on outsourcing manufacturing of the jewelry. I will provide designs and raw materials to the manufacturer. They will manufacture the finished goods and return it to me. In turn, I will pay them for the manufacturing service they render.

Would service tax be applicable in this situation and who would be liable? Also, since I am not myself manufacturing the finished product, who would be liable for the excise duty, me or the manufacturer?

Thanks in advance for the help.

Replies (3)

In my view, the nature of activities that you plan to take up/outsource pertains to job work. Since this activity will amount to manufacture, it will not attract any service tax.

Further, the liabilty for excise will be your's and not of the job worker assuming that he is claiming exemption from the same under the excise act.

Note that, since you will be providing the raw material to the job worker, it will not amount to sale and hence, you will also be laible to deduct TDS under section 194C on the labour charges paid by you (assuming that you fulfill the conditions laid in this section).

Thanks for the reply Harsh.

from my understanding, service tax is not applicable if any job work does not amount to manufacturing. The act mentions this clearly. But is does not mention what if the job work amounts to manufacturing. Can you please suggest that it will not be liable for any service tax even if the job work amount to manufacturing of a finished product. I myself will not perform any  process on the job work manufactured goods. They will be final products available to sell.

 

Also, for TDS, they job worker will not be my employee. Instead I will pay them for their services on a per work basis. Will I still be liable for it?

CA Harsha reply in reagrd to central excise may not be correct.

Under Central excise only the person doing the activity of manufacturer is liable. The ownership is not relevant. Liability on job worker for manufacture


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