Service tax on labor contractor for refining of gold

This query is : Resolved

Sanjeev Agarwal (Querist)
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28 January 2016 The assessee is engaged in refining of pure gold out of Gold Dore Bars, make Bars out of this pure gold and sale Gold Bars in the market (falling under Chapter 71 of the Central Excie Tariff Act). His unit is eligible for exemption from payment of Central Excise Duty as per CE Circular No.-50/2003. He has given all the labor work on contract to a labor contractor. Does the contractor need to collect and pay service tax on labor contract amount? If yes at what rate?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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05 February 2016 Even though the assessee is eligible for exemption from payment of Central Excise Dutyas per CE-Circular No:50/2003, the services received from a labour contractor is subject to service tax. Prima facie the service provider i.e. the labour contractor is liable for collection of Service Tax on his invoices and remitting the same to the credit of Central Government under Supply of Manpower Service. However, if your assessee is a body corporate and the service provider i.e. the labour contractor is an Individual, HUF or firm, then your assessee is liable for remitting the service tax even though he is the service recipient under Notification 30/2012 - Service Tax under the Reverse Charge Mechanism. In case of Reverse charge there is no concept of small service provider and hence no threshold exemption.