Siddharth Prasanna (Articled Assistant) (160 Points)
10 June 2010
Firm "X" is a manufacturer of vehicle input goods. At the same time , "X" receives materials from another company "Y" to process the same kind of goods for them with the help of the labour and equipments of Firm "X". The invoices that are raised against "Y" narrates as "Being invoice raised for labour charges". Will this be a taxable service ? And will service tax be applicable for this if the amount received over here exceeds the threshold limit?
saranraj
(CA FINAL)
(419 Points)
Replied 10 June 2010
NO. purchase of materials for manufacturing goods is not considered as a service and service tax is not applicable in such cases.
Venkateswara Rao Sapare
(Accountant)
(1500 Points)
Replied 10 June 2010
Yes. The subject “Labour charges” are classified as a “Taxable Service”, under the “Service Tax” net of “Indirect Taxes”.
Same would also come under purview of “Direct Taxes” attracting ‘TDS” under section 194C
CA SOURAV KUMAR GANDHI
(B.com (H), CA )
(133 Points)
Replied 14 June 2010
Hi sir
I have faced a practical difficulty while auditing the books of a fabrication partnership unit. Service tax on freight (on transportation of material) is payable by payer of freight, where payer may be a consignor or consignee, depending upon the case. In my case freight is payable by auditee (our client), so service tax liability is also upon them.
but what will be the situation if the transportation charges (on shifting of fixed assets, machines, and all other things except material) are paid. Whether there will be service tax liability on our client.
help me in this case, so that i can proceed.
CA SOURAV KUMAR GANDHI
(B.com (H), CA )
(133 Points)
Replied 14 June 2010
Sir, one more situation i faced, for which i need ur help.
Ex: suppose our total transportation charge is Rs. 20000, out of which supplier has paid Rs. 4000 as advance to transporter, and charged such advance to us in the invoice raised by the supplier (indirectly whole Rs. 20000 is beared by us) , then on the arrival of material we have paid the balance i.e. Rs. 16000 after deducting TDS, suppose the final payment made by us is Rs. 16000-2%(TDS).
Sir my question is service tax will be payable on what amount?
Excel Mastery Program
CAclubindia
