Service Tax on Job charges

[kiran pai]

Dear Sir, We are the leading manufacturer of Garments in India. Some times we under take garment job work from the out side parties. Our sales dept. raise invoice for the job work as 'finishing and packing' Job charges only. And applying 10.3% Service tax under the category of Business Auxiliary Services. Now please let me know is it correct what we are charging or wrong.

[Brijesh Verma]

Dear Kiran Ji

Please check the excise applicability on the Job-work carried out by your company under the Special Procedure for Textile & Textile Articles under Central Excise Law. In case, the activity doesn't amount to manufacture under Section 2(f) of the Central Excise Act, 1944 then the Service Tax Charged is OK.

AI Summary

Service tax on finishing and packing charges hinges on whether the activity amounts to manufacture under Section 2(f). Applicability of service tax on finishing and packing job charges depends on whether the job-work amounts to manufacture under the Central Excise regime; if it does, excise law applies under textile special procedures, but if it does not, charging service tax under Business Auxiliary Services is appropriate.