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Stitching by tailor- service tax or excise duty ?

CA Himanshu Bansal (Risk Manager) (2345 Points)

05 September 2014

Hi,

I am just wanted to know what is the tax treatment on the stitching work done by tailoring shops..

We give cloth to them for stiching, surely this is jobwork.Now the process also amounts manufacturing.So according to me there should be excise duty on their work..

Service tax is levied in jobwork on the "process not amounting to manufacture".Here the process amounts to manufacture.

I want more supporting for this view..Pls discuss.

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7 Replies

CA Vasiullah (Vasi) (Audit Executive) (1813 Points)
Replied 05 September 2014

Interesting !! I also want opinions on this...

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TANK JIGNESH SANJAYBHAI (STUDENT) (55 Points)
Replied 05 September 2014

I thing there will be a st liablity since there is no manufacturing activity being carried out in stitching work and this activity very much resembles to work contract

Sourav (Achieving d UnAchieved) (991 Points)
Replied 05 September 2014

Service tax should be levied in my opinion...

Jithin (Learner) (1057 Points)
Replied 05 September 2014

Hi Himanshu pls read page 3 of the attached file. Mr.V.S.Datey has given his opinion on this issue there. Hope it helps..

P.S.Dont know whether the attached file has taken into account the recent amendments in excise and service tax. I amnt well-versed in idt topics and so cant give my own take on the issue. On reading ur query, I thought of googling on this topic and got this file. Hope it helps..

Attached File : 389034 1361901 ca v s.pdf downloaded: 1013 times

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CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 05 September 2014

Originally posted by : Jithin
	Hi Himanshu pls read page 3 of the attached file. Mr.V.S.Datey has given his opinion on this issue there. Hope it helps.. P.S.Dont know whether the attached file has taken into account the recent amendments in excise and service tax. I amnt well-versed in idt topics and so cant give my own take on the issue. On reading ur query, I thought of googling on this topic and got this file. Hope it helps..

Hi jithin, Thanks..

Extract from the attached file

" We are tailors. When we receive cloth from customers, we cut the loth as per
dimensions and give them to skilled workers for stitching on job work basis. We then
supply the stitched cloths to our customers, putting mark of our shop. Is there any
liability of service tax or excise duty?

Your job workers will not be liable. Even your activity will not be subject to service tax,
since stitching cloth is ‘manufacture’ and hence outside the service tax net. Further, 4
readymade garments are subject to excise only if they are branded. Putting your house mark
is not ‘branding’ of goods. "

This is what I was mentioning in my query. Its manufacture its confirmed, so its out of levy of service tax.Also, Excise duty is exempt if the clothes are stitced at retail tailoring shops(unbranded).

So, there is no service tax.Beingh manufacture, it is covered by excise, but it is also exempt.

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CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 05 September 2014

This is the legal support for exemption from excise duty :

https://www.cbec.gov.in/ub1112/dojstru1.pdf

Refer para 3.5 of the link given.

"Note 12 of Chapter 61 and Note 11 of Chapter 62 already prescribe that certain processes

such as affixing a brand name on a product, labeling or re-labeling of containers etc. shall be
processes amounting to manufacture. A similar note (Note 5) is being added to Chapter 63. As for
the valuation of these goods, tariff value has already been fixed at the rate of 60% of the retail sale
price in terms of notification No.20/2001-CE (NT) dated 30th April, 2004. This provision is being
extended to goods of Chapter 63 as well. It may be noted that SSI exemption is being extended to
the goods attracting this levy. This is being implemented through a suitable amendment in item
(xxvi) of the Annexure to notification No.8/2003-CE dated 1.3.2003. Although this should take
care of small manufacturers, it may be made abundantly clear to the field formations that the levy
does not apply to retail tailoring establishments that stitch garments in a customized manner to the
size and style specifications of individual customers, whether out of fabric purchased by the
customer from the same establishment or fabric supplied by the customer. "