Service Tax on Labour Charges

[Guest]

1. We are manufacture of power driven pumps and we send our pumps to job worker for packing. The packing material is supplied by us. Job worker only do the packing activity.

He is raising invoices for labour charges along with Service Tax.

Is service tax applicable on only labour charges. If yes, kindly provide documentory evidence.

 

2. Also we receive some services from abroad on which we are paying service tax.

Do we have to pay this service tax only through GAR7 (as like GTA payment) or we can use the service tax credit availed with us for payment of this service tax.

Prakash Patil

9833308491

[YAGAY andSUN]

Under packaging services you are liable to pay service tax on the following:-

Labour charges

Packing material supplied by you free of cost to the packer.

Furhter,ServiceTax will be paid under section 66A in cash.

[Guest]

Thank you sir.

[Vijay kumar]

Dear Sir, if after packing, the goods are returned to u and are cleared on payment of duty, there is no need to pay service tax on the packing activity. Only if the pumps are exempted from payment of duty, the packing activity is liable to service tax under BAS in the hands of the job worker (Nofn.8/2005-ST dt.1.3.2005 refers). As regards liability under Section 66A, u have to pay the tax through GAR-7 challan since the tax is paid in the capacity of receiver of service and not as a service provider. However, you may take credit of the same, if it is an input service for you, in terms of its definition under Rule 2(l) of Cenvat Credit Rules, 2004.

[Mahir S]

Yes, if packing material is supplied by you and only labour activity is done by the job worker, then the question of payment of service tax does not arise. If the job worker is presently raising service tax invoice, tell him to raise invoices only for labour charges, without service tax.

[deepak gupta]

we provide repairing and service.how much service tax will have to pay.

AI Summary

Reverse charge on imported services requires payment by receiver via GAR challan, creditable if treated as input service. Service tax applies to packing activities by a job worker: labour charges and packing material supplied free are taxable as packaging services. Tax on imported or specified services payable by the receiver under the reverse charge mechanism must be paid in cash through the appropriate challan, but may be taken as Cenvat credit if the service is an input service. Packing by job workers is not taxable when goods are returned and cleared on payment of duty; exemptions may otherwise render the packing service taxable.