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Service tax on job work

10 August 2011

Dear Sir,

We are getting our goods painted from outside. Vendor takes care of everything including the paint. We are sending this under jobwork challan. Our finished goods are taxable?

I think the vendor is not supposed to charge service tax duty on the same. This exemption is as per notification 8/2005 service tax. Since he is taking cenvat credit on the paint , is he supposed to pay/reverse any excise duty ?

Actually the vendor is charging service tax on his invoice and i wanted to re-confirm the same.

If anybody confirm this with notification then it will be highly useful.

Regards

C V Subramanian

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1 Replies

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 10 August 2011

If you are paying excise duty on your final product, the job worker is eligible for exemption under Noti. 8/2005. But he cannot take cenvat credit of paints. Alternatively, jobber can take cenvat of paints and pay service tax on gross charges including material cost and you can take cenvat credit of the tax so paid provided you are paying excise duty on your product. Jobber can also opt pay service tax on job charges alone provided cenvat credit os paint is not taken. Further if painting amounts to manufacture under given facts, service tax is exempted. In any case jobber is liale to vat under works contract.