Service tax on job work to job work

[Gangadhar Haldikar]

As per entry 30 of 25/2012, 'Carrying out an intermediate production process as job work in relation to any goods excluding alcoholic liquors for human consumption, on which appropriate duty is payable by the principal manufacturer.' is exempt.

Suppose the principal manufacturer gives job work to job worker A, who in turn, gives it to job worker 'B'. Now service in the hands of first level job worker is undoubtedly exempted. But is the service exempted in the hands of second level job worker 'B' also? Because it is in relation to goods on which duty is payable by principal manufacturer, though the PM is not the direct customer of the second level job worked. The entry does not require it either.

Plain reading of the entry suggests that exemption should be available.

Views please.

AI Summary

Debate on whether service tax exemption under Notification 25/2012 applies to subcontracted job work for FY 2015-16. A discussion on a forum concerns the applicability of service tax on job work when a principal manufacturer assigns work to a job worker, who then subcontracts it. The main question is whether the exemption under entry 30 of Notification 25/2012 applies to the second-level job worker. One participant argues that the exemption should apply since it relates to goods on which duty is payable by the principal manufacturer. Another participant clarifies that if the process does not amount to manufacture, service tax is applicable. A third participant disagrees, citing historical exemptions and arguing that no service tax was payable for the period in question (FY 2015-16).