Liability of service tax on job work

[Vijay Chitte]

I am doing a job work like production and processing of goods on behalf of the client. All raw materials and semi-finished goods supplied by client and after complete the job work, we return back to the said client and this product is dutiable. My question is : 1) We are liable to charge the service tax on job work charges? 2) I understand that , As per Notification No.8/2005-ST, if products are excisable, there is no need to charge the service tax. In this case “SHOULD WE TAKE ANY DECLARATION FROM THE CLIENTS?” that this product is dutiable and don’t charge the service tax on us”. Please give your expert views. from Vijay Chitte

[Guest]

Law is very clear. Under Business auxiliary service if such job work results in manufacture of goods on which excise duty is applicable, there shall be no levy of service tax. The reason being that such service tax, if levied shall be eligible for CENVAT Credit against excise duty. To be on the safe side it is always better to obtain a declaration or certifcate from the person for whom such job work is done that the goods are excisable.

[Surender Gupta]

First of all you must note that if the result of the processing activity is amounting to a manufacturing, there is no need service tax at all. However, if the process is not amounting to manufacture, and you would like to avail the benefit of notification no. 8/2005 in that case, it is important to have proper evidence that the goods return back to the supplier after job work have been used in the finished goods cleared on payment of appropriate excise duty.

[Guest]

A company is a manufacturer of cloths(garments) and doing job work  for his client but not registered in Central Excise Act.. Is he liable for service tax i.e should he charge service tax from his client? 

AI Summary

Service tax exemption for job work: no service tax where processing results in excisable manufacture; obtain client declaration. Job work that results in the manufacture of excisable goods is not subject to service tax because any such tax would be creditable against excise. If the process does not amount to manufacture, the non-levy under the notification requires evidence that processed goods are returned and used in finished goods cleared on payment of excise. Job-workers should obtain a declaration or certificate from the client confirming the goods are excisable and will be cleared on payment of appropriate excise duty to support non-levy.