Service Tax on Hand Embriodery

[Guest]

In the current case cloth is given to the job worker who does the embriodery work and then return the same to the principal. Is service tax applicable on such hand embriodery work ? Plz explain the same with relevant case law,if applicable.

[PARAMESWARAN K L]

May be applicable under the category works contract.

[PARAMESWARAN K L]

May be applicable under the category works contract. Please see the ammendment proposed by Budget 2012 in which negative list has been brought and thus widening the scope of service tax. If this service does not fall under negative list, service tax may be leviable.

[PARAMESWARAN K L]

Also refer some exemption notifications issued while peresenting budget 2012. If your case is not covered by negative list and exemption notification, service tax is leviable.

[Vijay kumar]

In terms of the definition of BAS, any process undertaken for or on behalf of a client is a taxable service. However, any such process amounting to manufacture in terms of Section 2(f) of CEA, 1944 is not covered under the purview of BAS. So, if the process of carrying out embroidery on plain cloth amounts to manufacture i.e. a distinctly new commercial product comes into existence (it seems so herein), then the question of ST does not arise. However, if it is not so and the principal does not pay any excise duty on the final product, then the job worker is liable to pay service tax in terms of  Notification No.8/2005-ST. Accordingly, if the facts are available, the liability of job worker can be advised. As regards the negative list, same is not in force as yet. It will come into force from a date to be notified after the assent of the President to the Finance bill 2012). Under the new regim, the activity attract service tax, in all possibility, subject to threshold limit, which is available now also.

[YAGAY andSUN]

This Notification No.8/2005-ST has been further amended by the Notification No.19/2005-ST,.  Please also refer this Notification No. 19/2005-ST.

[Sunil Ahuja]

Service tax is payable when the activity does not amount to manufacture in terms of section 2(f) of central Excise Act,1944. Further in case the goods are returned to principle who in turns pays appropriate duty while clearing such goods then even Service tax is not payable.

[YAGAY andSUN]

Both the Notification No.8/2005-ST and 19/2005-ST. clarifies the same thing as replied by Mr. Sunil Ahuja.

[Mahir S]

In Chapter 58 of the CETA, 1985 chapter note 6 refers as follows :

In heading 5810, the expression "embroidery" means, inter alia, embroidery with metal or glass thread on a visible ground of textile fabric, and sewn appliqué work of sequins, beads or ornamental motifs of textile or other materials. The heading does not apply to needlework tapestry (heading 5805).

The details of embroidery work is not been mentioned in the query raised herein; however, it appears that above referred activities detailed in chapter note 6 above are not carried out by the job worker (mentioned in the above query), as only hand embrodiery work is done and that too prima facie without the aid of power.

Hence. the activities undertaken by the job workder does not appear to be a manufacturing actitivty and not excisable.

As regards applicability of service tax, it appears that only hand related embroidery work is carried out. Such work refers to a Labour work carried out on behalf of the Principal, hence no services are provied herein.

As the process (hand embroidry work) does not amount to manufacture in terms of Sn.2(f) of CEA, 1944, the same is also not covered under the purview of BAS in respect of service tax law. However, if the final product is chargeable to duty, then it is the responsibility of the principal manufacturer to pay excise duty on it, and the job worker herein is not concerned at all; as his own work neither falls under the definition of manufacture nor any services provided by him.

Hence, no service tax applicable herein. There are no case laws available on this topic in the service tax law, as prima facie such hand embroidery work is nothing but only labour work carried out by hand.

[Guest]

Thank You Everyone.. It was a great help from your side.

[DEEPAK SHARMA]

It is submitted that, Notification saying if goods cleared on paying appropriate central excise duty from the end of Principal. my submission if goods not clearing on appropriate duty paying from the end of principal (Principal is exempted) then either service tax is chargeable or not; please clarify

AI Summary

Service Tax Debate: Does Hand Embroidery by Job Workers Qualify as Manufacturing or Taxable Labor? Key Exemptions Discussed. A discussion on whether service tax applies to hand embroidery work performed by a job worker on cloth provided by a principal. The consensus suggests that if the embroidery process constitutes manufacturing, it is not taxable under service tax laws. However, if it is merely labor work and not manufacturing, service tax may apply unless the principal pays excise duty on the final product. References are made to relevant notifications and amendments, highlighting that hand embroidery typically does not qualify as manufacturing, thus not attracting service tax. Participants sought clarity on exemptions and the applicability of service tax under various conditions.