we are geting work done from the contractors who manufacture our product from the basic material to End product at our premises They charge only for labour charges From April 2007 to till date he work done of Rs 10 Lac or it may be more in coming days .we deduct TDS from contractors at the rate 2.266% We want to know whether service tax is applicable or not on the contractor Thanks in advance
15 December 2007
clause (v) of SECTION 65 (19) OF THE SERVICE TAX ACT AS AMENDED BY FINANCE ACT 2006 DEFINES BUSINESS AUXILIARY SERVICES WHICH MEANS AND INCLUDES(AMONG MANY SRVICES)ANY SERVICE IN RELATION TO "PRODUCTION OR PROCESSING OF GOODS FOR AND ON BEHALF OF THE CLIENT " BUT DOES NOT INCLUDE ANY ACTIVITY THAT AMOUNTS TO MANUFACTURE WITH IN THE MEANING OF CLAUSE (f) of section 2 of the central excise act 1944. SO IAM OF THE VIEW THAT if yours is not a manufacturing activity under central excise act ,(in that case you ought to register under central excise act) THE CONTRACTOR IS A SERVICE PROVIDER WHO NEEDS TO REGISTER UNDER SERVICE TAX ACT ( THRESHOLD LIMIT FOR REGISTRATION IS RS. SEVEN LAKHS PER ANNUM) AND LIABLE TO CHARGE SERVICE TAX . then you need to deduct tds on total of the bill amount plus service tax . R.V.RAO
CAclubindia
