Excise & service tax job work

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 September 2013 Please advise :

ABC India is a trader which purchases finished goods from dealers and sells to its customers.
1. Can ABC india also procure raw materials and send it for job work , so that job worker makes/assembles the final product and send it to ABC india, who sells the final product without charging any excise duty ?
2. Is service tax applicable on job work if job workers total bills in a year is less than 10 lakh ? is 10 lakh exemption limit is on job work value or value of raw material converted to finished good ?

sudarshan

sudarshan (Expert)
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24 September 2013 if excised duty is not paid , no exemption for job worker available.
exemption is based on invoices raised.

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2013 If ABC india doesnt pay excise duty , what is the rate of service tax charged by the job worker ? does he need to be registered with service tax or can ABC india pay service tax ? at what rate ?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 If ABC India does not pay excise duty on goods manufactured by them, but engages a job worker to perform certain services, the service tax implications would depend on the nature of services provided by the job worker and the threshold limits specified under the Service Tax rules at that time (prior to the implementation of GST).

Here’s a general outline of the scenarios:

1. **Job Worker Providing Services**: If the job worker is providing services that are liable to service tax (assuming this is before GST), they would need to be registered under Service Tax if their aggregate value of taxable services exceeds the threshold limit specified under the law. As of the last update, this threshold was INR 10 lakhs (small-scale exemption limit).

2. **Service Tax Rate**: The rate of service tax applicable would depend on the nature of the service provided by the job worker. Service tax rates varied depending on the specific type of service. For example, there were different rates for services categorized under "taxable services" as per the Finance Act.

3. **Responsibility for Payment**: Typically, the responsibility for payment of service tax rested with the service provider (job worker) who was rendering the taxable service. ABC India, as the recipient of services, might be required to ensure that the job worker is complying with the service tax regulations, but the actual liability to pay service tax would be on the job worker if they are providing taxable services.

4. **Documentation**: ABC India would need to ensure that proper documentation is maintained regarding the services received from the job worker, including invoices that clearly indicate whether service tax is applicable and at what rate.

5. **Changes Post GST**: With the introduction of GST, the landscape has changed significantly. GST has subsumed both excise duty and service tax into a single tax regime. Therefore, if you are operating under GST, you would need to refer to the GST laws and rules for similar situations.

It's important to consult with a tax advisor or legal expert who can provide specific advice based on the current tax laws applicable to your situation. They can help navigate the complexities of excise duty, service tax (pre-GST), or GST as applicable to your business operations.