Job work in manufacturers premises and service tax

[Narendra Soni]

Dear Sir,

We are working for two cases, both the cases are independed to each other,kindly suggest seperetly for both the cases:

X is a manufacturer of Polypropelene Bags/Flexible intermediate bulk bags (FIBC) products.Process:- Pp Granaules>PP Yarn>PP Fabric>Cutting/stiching and finaly FIBC &PP Bags produced.

1. Labour provided by contractor for production, Manufacturer pay at piece rate or lumptiom for the labour employed by the contractor.

Is this service provided by the contractors labour fall under RCM as manpower supply and is service tax applicable.

Is this work fall under job work.

Can the board circular No.190/9/2015-service tax dtd.15.12.2015 is applicable.

2.. He makes an agreement with some job workers where by X will give his machinery on lease/Rent to such job workers (M/C installed in factory of X) the job workers will bring his labours and do some intermediate work in the factory of X on the RM/product provided by X (m/cs are installed in manufactures factory "X") and return the processed products to X and X will finally export the said products under bond/LUT/on payment of duty .Contractor (Job worker) will charge rate per piece from X.Labour will work under control & supervision of his contractor only.

Kindly suggest Is service tax is applicable in this job work process in the hand of X or in the hand of contractor.Please provide reference of relevant notification circular in support.

AI Summary

Manpower supply classification determines whether service tax arises and if reverse charge applies to the manufacturer.
Whether piece rate contractor labour at a manufacturer's premises attracts service tax hinges on contractual characterisation and the nature of the processor's operations. Supply of manpower by certain contractor entities to a company may attract the reverse charge mechanism with the manufacturer liable. If the processor's work amounts to manufacture, Central Excise applies; if only intermediate, service tax may apply as job work under Notification No. 214/86. Renting of manufacturer installed machinery to a job worker can constitute a right to use/renting service attracting service tax.