Service tax on work carried out in factory by contract labour

[Narendra Soni]

Dear Experts.

We are manufacture of Bag ,Yarn & Fabric Manufacturer. In our factory different types of works like Packing,Inspection,Folding,Sorting,Loading,Unloading of Bags,yarn & Fabric are carried out by labours of contractors.We pay them per KG/Meter/Bag.

Kindly suggest is service tax is applicable on these activities.

AI Summary

Experts Debate Service Tax on Contract Labor for Packing and Sorting: Manpower Supply or Contract Manufacturing? A manufacturing company inquires about the applicability of service tax on activities performed by contract labor, such as packing and sorting, paid per unit (KG/Meter/Bag). Experts discuss whether these activities fall under manpower supply, which would require service tax under the reverse charge mechanism. Some suggest it might be classified as business auxiliary service if paid per unit, while others argue it constitutes contract manufacturing, exempt from service tax as it is part of the manufacturing process. The consensus leans towards no service tax if the work is part of manufacturing, but further clarification is sought.