Service tax input on job work Charges
This query is : Resolved
30 January 2010
Sir
A manufacturing has a few divisions. A Division (Div I) makes componets for another division (Div II). Div I also give some work outside on jobwork basis. The jobworker will raise a service invoice. Can Div I take Service tax Input? Div I further send those parts to Div II which makes final product.
A manufacturing has a few divisions. A Division (Div I) makes componets for another division (Div II). Div I also give some work outside on jobwork basis. The jobworker will raise a service invoice. Can Div I take Service tax Input? Div I further send those parts to Div II which makes final product.
01 February 2010
The service comes under BAS - processing for or on behalf of another. If Div I is paying CED then the goods would be sent by them to Div II under Rule 4 (5)(a). In such a case Div II can also issue under the same rules and JW need not charge the CED under not 8/2005.
If JW has charged the ST then Div II can avail the credit as the bill wouldbe addressed to DivII. If Div I gets a ISD ( input service ditributor) registration then they can avil credit of the JW + other bills addressed to Div I.
If JW has charged the ST then Div II can avail the credit as the bill wouldbe addressed to DivII. If Div I gets a ISD ( input service ditributor) registration then they can avil credit of the JW + other bills addressed to Div I.
02 February 2010
suppose in this case the company availing notification no 8/2005, then can Div I take service tax input on bill raised to Div I or can Div II take this as input credit
24 July 2025
Great question! Here’s how the service tax input credit on job work charges generally works in your scenario:
---
### Scenario Recap:
* **Division I (Div I)** manufactures components and outsources some work to a job worker (JW).
* The job worker raises a service tax invoice for the job work.
* Div I sends the finished components to Division II (Div II), which assembles the final product.
* The company is availing **Notification No. 8/2005** (exemption on certain job work services).
---
### Key points:
1. **Notification No. 8/2005** exempts job work services when goods are sent directly by the job worker to the principal (in your case, possibly Div II).
2. If the job worker **charges service tax** on job work invoice **to Div I**, and Div I pays the tax:
* **Div I can take input credit** on the service tax paid **only if** it receives the invoice in its name.
* Div I can distribute credit to other units if registered as ISD (Input Service Distributor).
3. If the company avails **Notification No. 8/2005**, typically the job worker **should not charge service tax** on job work if goods are returned directly to the principal or another division (Div II) under Rule 4(5)(a) of CENVAT Credit Rules.
4. If the job worker **charges service tax to Div II** directly (invoice addressed to Div II), then **Div II can take the credit**, not Div I.
---
### Practical flow for your case:
* If the **job worker invoices Div I**, and tax is charged, **Div I can claim input credit**.
* If the job worker invoices Div II directly, then **Div II can claim input credit**.
* If the exemption under **Notification 8/2005** applies (goods go directly from JW to Div II), ideally **no service tax should be charged by JW**, so no input credit is needed.
* If Div I is availing ISD registration, it can distribute the input credit of service tax paid by Div I to Div II.
---
### Summary:
| Who is invoiced by Job worker | Can Div I claim credit? | Can Div II claim credit? | Service Tax applicability under Notification 8/2005 |
| ----------------------------- | ----------------------- | ------------------------ | ------------------------------------------------------ |
| Job worker invoices Div I | Yes | Only if ISD distributes | Service tax charged if exemption conditions not met |
| Job worker invoices Div II | No | Yes | Service tax charged if exemption conditions not met |
| Notification 8/2005 applies | No service tax charged | No service tax charged | Exemption if goods directly sent to principal (Div II) |
---
If you want, I can help you draft a detailed note or provide references to specific rules and notifications. Would you like that?
---
### Scenario Recap:
* **Division I (Div I)** manufactures components and outsources some work to a job worker (JW).
* The job worker raises a service tax invoice for the job work.
* Div I sends the finished components to Division II (Div II), which assembles the final product.
* The company is availing **Notification No. 8/2005** (exemption on certain job work services).
---
### Key points:
1. **Notification No. 8/2005** exempts job work services when goods are sent directly by the job worker to the principal (in your case, possibly Div II).
2. If the job worker **charges service tax** on job work invoice **to Div I**, and Div I pays the tax:
* **Div I can take input credit** on the service tax paid **only if** it receives the invoice in its name.
* Div I can distribute credit to other units if registered as ISD (Input Service Distributor).
3. If the company avails **Notification No. 8/2005**, typically the job worker **should not charge service tax** on job work if goods are returned directly to the principal or another division (Div II) under Rule 4(5)(a) of CENVAT Credit Rules.
4. If the job worker **charges service tax to Div II** directly (invoice addressed to Div II), then **Div II can take the credit**, not Div I.
---
### Practical flow for your case:
* If the **job worker invoices Div I**, and tax is charged, **Div I can claim input credit**.
* If the job worker invoices Div II directly, then **Div II can claim input credit**.
* If the exemption under **Notification 8/2005** applies (goods go directly from JW to Div II), ideally **no service tax should be charged by JW**, so no input credit is needed.
* If Div I is availing ISD registration, it can distribute the input credit of service tax paid by Div I to Div II.
---
### Summary:
| Who is invoiced by Job worker | Can Div I claim credit? | Can Div II claim credit? | Service Tax applicability under Notification 8/2005 |
| ----------------------------- | ----------------------- | ------------------------ | ------------------------------------------------------ |
| Job worker invoices Div I | Yes | Only if ISD distributes | Service tax charged if exemption conditions not met |
| Job worker invoices Div II | No | Yes | Service tax charged if exemption conditions not met |
| Notification 8/2005 applies | No service tax charged | No service tax charged | Exemption if goods directly sent to principal (Div II) |
---
If you want, I can help you draft a detailed note or provide references to specific rules and notifications. Would you like that?
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