Service Tax v/s In house Contractors

[Ashok Chopra]

I am an exporter of Readymade Garments and having valid Registration Certificate of Service Tax.  I am receiving services of In House Jobworker for stitching and finishing on piece rate basis.  They are raising me invoices and are not charging any service tax, but their transaction of each job worker  is much more than stipulated limited. I am deducting TDS and paying regularly to Income Tax Department

My queries:-

1. Whether i am liable to pay service tax? if yes, what next i should do?

2. Should i insist Job worker to get themself registered with Service Tax and charge Service Tax on their bills and i should book entire bill amount inclusive of service tax as expense in my books of accounts?

3. Can i get refund of this Service Tax paid to In House Job Worker from Service Tax Department? If yes, please tell me the procedure.

4. I am not registered with Central Excise, can i file refund under Rule 5 of CENVAT Rules? if yes, please let me know the procedure.

I shall be thankful, if anyone will advice me parawise

Regards

[Guest]

1. Sr. No. 30 of Mega Exemption Notification No. 25/2012-ST provides for exemption on intermediate production process undertaken by job worker in relation to textile processing. As the transaction in your case is covered by this entry, it is not liable to service tax and hence there is no liability under RC.

2. No need to ask as the service is exempted.

3. Not Applicable

4. Regarding above transaction, no case of refund arise. For CENVAT credit availed on other inputs and input services, refund can be claimed under Rule 5 based on service tax registration number. 

[Ashok Chopra]

Regarding Sr. 1, please advice me whether this exemption is applicable on intermediate production process undertaken by job worker in relation to manufacture of Wooden Furniture or not?

[Guest]

(1) If excise duty is paid/payable by principal manufacturer on clearance of final product, then above exemption is available to job worker.

(2) On the other hand, if the activity of job worker amounts to manufacture under the provision of Central Excise Act, then he will be covered by Negative list.

(3) In other cases, liability would arise on job worker to charge ST.

[Ashok Chopra]

Dear Chaudhary Ji,

We have exported final product at nil rate of excise duty under bond. what is the status? is exemption is available to Job Worker?

If exemption is not available to Job Worker and process covered under manufacturing activities and Job Worker is not charging any excise duty or service tax on the bills raised by him.  Can excise/service tax department put this responsibility on us as Job Worker is working in our premises?

[Guest]

You can send facts of the case along with consolidated queries at my mail ID ashish at the rate of skpatodia.in. 

[Guest]

or contact me at 0141 4045450

AI Summary

Service tax exemption for in house job workers may apply where intermediate production processes are covered, affecting chargeability. Exemption for intermediate production processes in textile jobwork can render in house jobworker services not liable to service tax; applicability in other sectors depends on whether the principal manufacturer pays excise on final clearance or whether the jobworker's activity amounts to manufacture under the Central Excise Act. If the principal pays excise, the exemption may apply to the jobworker; if the activity is manufacture, central excise/negative list considerations may displace service tax. Refunds or CENVAT claims require proper registration and adherence to refund procedures.