Serviec tax on jobwork

[Guest]

Dear Sir,

We are a job worker and we are not registered under central excise we received material from Excisable unit we doing only job work and further we send these material to another job worker for any other process. and after receiving these material we send back to principal manufacturer and the principal manufacturer clearance the material with payment of appropriate duty.

My query is the third party job worker billed us and he charge the vat as well as service tax both in his bill.

Is this charged in the invoice both service tax and vat is correct or not ?

Regards

Swapneswar

[Rajagopalan Ranganathan]

Sir,

Since you send already partially processed inputs supplied by the principal manufacturer to another job worker to carry out certain other process, it does not involve any sale. Therefore no vat is payable.

Since your principal manufacturer pays duty on the final products, as per Sl. No. 30 (c) of Notification No. 25/2012-ST dated 20.6.2012 as amended "any goods excluding alcoholic liquors for human consumption, on which appropriate duty is payable by the principal manufacturer is exempted from payment of service tax.

[Ganeshan Kalyani]

The consumables used during processing job is deemed to be sold which attract VAT .

[Guest]

Dear Sir's,

Thank you for your reply but if the third party job worker is adding the material in his process than is it attract work contract service or not ? Or it attract the VAT or not ?

Regards

Swapneswar Muduli

[Rajagopalan Ranganathan]

Sir,

In my opinion the transaction between principal manufacturer and first job worker and between first job worker and the second job worker do not amount to sale of goods and hence vat is not applicable. Only when a transformer machinery etc is sent to job worker for the purpose of repair and if the job worker replaced certain parts while carrying out repairs in that case it can be treated that replaced parts are sold and will attract vat.

[Ganeshan Kalyani]

Whether the series of Job workers' premises are registered as additional place of business in the VAT certificate of principal manufacturer . if yes then no VAT is applicable.

[Guest]

Dear Sir,

Thanks for your reply.

In the above case the first job worker is not registered in Central Excise a swell as service tax. So when the first job worker send the material to second job worker they send through Normal Returnable Delivery Challan. The second job worker doing job work with adding some material also than send back these material to first job worker. The second job worker charge the VAT on 40% that material portion and Charge Service tax on full amount.

So query is this transaction is correct or not ?

Whether this transaction also exempt from service tax under Notification No-25/2012.

Regards

Swapneswar muduli

AI Summary

Service tax exemption on jobwork inputs may apply where principal manufacturer pays duty; VAT depends on sale characterization. Partially processed inputs moved between a principal manufacturer and job workers are not treated as sale and generally do not attract VAT, though consumables or replaced parts may be deemed sold and taxed. If the principal manufacturer pays duty on the final goods, jobwork services relating to those goods can be exempt under Notification No. 25/2012 ST; adding material or value by a downstream job worker may recharacterise the transaction as a taxable work contract or sale and affect whether VAT and service tax are properly charged.