Service Tax on Sub Contract

service tax is not required if manufacter charges excise duty or service tax then no service tax on the work of sub contractor

In Jobwork activity, there are two parties.  Jobworker and supplier of inputs.  If the process done by the jobwoker amounts to manufacture, then he is liable to pay Excise duty.  Otherwise, service tax will be come into picture for jobwoker under 'Business Auxiliary Service' category.

Exemptions available to Jobwoker:

A) If the process done by jobwoker amounts to manufacture:

1) Under notification no:214/86:  Jobwork needs to take a declaration from the principal supplier declaring that the principal supplier will pay the Excise duty on his final product.

2) If declaration is not available, then Jobworker can get SSI exemption i.e. upto 1.5 crores.

B) If  the process done by Jobworker not amount to manufacture:

1) Jobworker needs to take declaration under 8/2005 from principal supplier.  The principal supplier needs to send his goods under Rule 4(5)(a) challan.  In this case, principal supplier will pay the Excise duty on his final product.

2) If declaration is not avaiable, then exemption is available up to 10 laksh in a financial year for Small scale service provider