In house job-work by Export Company and service tax

[Ashok Chopra]

Respected Forum,

I am manufacturer-exporter of ready made garments. i am availing benefit of Duty Drawback. Stitching of garment is done in my company on contract basis. Contractor raise bill on me.

During service tax audit, officer is of opine that this service will fall under reverse charge mechanism and i am liable to pay service tax on contractor's bill.

Please guide me accordingly. Also please provide me copy of notification and case law to satisfy my management.

Thanks and regard

AI Summary

Debate on Service Tax Applicability Under Reverse Charge for Stitching Services in Garment Manufacturing An export company engaged in manufacturing ready-made garments raised a query regarding the applicability of service tax under the reverse charge mechanism (RCM) for stitching services provided by a contractor. During a service tax audit, an officer opined that the company is liable for service tax on the contractor's bill. Responses varied; some experts argued that the service is part of the manufacturing process and not manpower supply, thus not subject to RCM. Others maintained that service tax applies under RCM for manpower supply. One response noted it might be revenue neutral for the exporter.