In-house supervision charges and reverse charge mechanism

[Ashok Chopra]

Respected Forum,

I am manufacturer exporter of ready made garments (not selling in DTA, selling only cloth scrap), have some issues on service tax. I shall be thankful, if you will kindly guide me on following :-

I am giving payment to Supervisor on piece rate basis, he raise bill with following description:-

'In house supervision charges of your workmen towards cutting of ready made garments manufactured during the month as per detailed attached'

During service tax audit, the officer is of opine that this service will be come under reverse charge mechanism as Manpower Supply and i have to pay service tax on this amount.

Please guide me accordingly. If possible, please provide me notification or case law to satisfy my management.

Thanks and regard

AI Summary

Manufacturer Questions Service Tax on In-House Supervision Charges: Is It Manpower Supply or Job Work? A manufacturer exporter of ready-made garments sought guidance on whether in-house supervision charges paid to a supervisor on a piece-rate basis fall under the reverse charge mechanism for service tax purposes. During an audit, it was suggested that these charges might be considered manpower supply, requiring the manufacturer to pay service tax. Respondents clarified that if the supervision is considered job work and not manpower supply, reverse charge does not apply. They advised that service tax liability depends on whether the job work amounts to manufacturing. The consensus was that the manufacturer should review the contract to determine the correct tax treatment.