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Tax implecations

CA Deepak Kumar (CA AND B COM (P)) (66 Points)

24 April 2012

Hi greetings!!!!! To all.............

One of my Clint was doing the work of poolishing, cutting, shapping the diamonds,

Such diamonds was as returned to the customer after the work done......

my query is the implication of TAX on it as Dvat,WCT,or the service tax is applicable on this type of work and why ,,,,,

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Ashish gupta (CA FINAL) (28 Points)
Replied 24 April 2012

Notification No. 21/2005-Service Tax

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of production or processing of goods for, or on behalf of, the client, referred to in sub-clause (v) of clause (19) of section 65 of the said Finance Act, provided by a commercial concern, in the course of manufacture of,-

(a) cut and polished diamonds and gem stones; or

(b) plain and studded jewellery of gold and other precious metals,

falling under Chapter 71 of the Central Excise Tariff Act, 1985 (5 of 1986), from the whole of service tax leviable thereon under section 66 of the said Finance Act.

2. This notification shall come into force on the 16th day of June, 2005.

F. No. B1/5/2005-TRU

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Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 24 April 2012

In any state for VAT to be applicable there should be transfer of property in goods from the seller to the buyer . In the instant case there is no such transfer and hence no VAT is applicable .

In case of WCT the goods received after the contract changes as compared with the original goods . In the instant case the goods i.e . diamonds are changing , however there is no transfer of property as it is a pure labour work and so it is also not a WCT

Based on the above two explanations the TAX that is applicable on such work is SERVICE TAX as the services are being rendered by the service provider to the service receiver in the form of polishing , cutting , shaping the diamonds ...

Ok...

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