TaxTMI 
TaxTMI 
Whether textile processing such as tailoring, dying. fabrication, embroidery and other similar activities are works contract or not ?
TAXABILITY
08 May 2014 
2 Replies 
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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. (AI Summary)
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. (AI Summary)