TAXABILITY

[LAXMIKANT ARORA]

Whether  textile processing such as tailoring, dying. fabrication, embroidery and other similar activities are works contract or not ?

[rishi mohan]

In the above case.Works contractor is not required to charge 4 percent VAT on 33 percent of value of the invoice. Being 4 percent a composition one and VAT at the rate of 4 percent should be paid on total value. However, Service tax is payable on 67 percent value at the rate of 12.36 percent with the CENVAT credit of inputs/input services.

[Madhukar N Hiregange]

In tailoring there is no transfer of property and therefore not a WC. Not liable under ST also. 

Dying- to the extent of transfer of property, it is liable. To extent of consumables used not liable . Exempt as intermediary processing relation to textile

Embroidery maybe liable as thread transferred to that extent. NO ST due to same reason as above. 

AI Summary

Classification of textile processing determines VAT and service tax liability; tailoring not works contract, dyeing and embroidery partly taxable.
Classification of textile-processing activities determines VAT and service-tax treatment: composition VAT applies as prescribed; service tax is payable on the service portion with CENVAT credit where applicable. Tailoring, lacking transfer of property, is not a works contract and not chargeable to service tax. Dyeing is taxable to the extent it effects transfer of property; consumables-only processing is not a taxable transfer. Embroidery may be taxable to the extent thread is transferred into the goods; intermediary or ancillary processing without transfer falls outside service-tax incidence.