NEW DELHI: After all that commotion and uncertainty brought in last year's budget of supposedly (??), including even a job worker under the purview of Business Auxiliary Services, this Finance Bill fortunately clarifies and even exempts it, of course to a certain extent.
Augmenting Revenue – the easy way
We had in DDT 59 carried the news that the DG, Service Tax, has instructed the field formations to get these job workers registered under Service Tax and mop up additional revenue as he was lagging behind the assigned service tax target. In a couple of RAC meetings the Commissioners also took a view that job workers are required to pay Service Tax.
Birth of the dispute
As netizens are aware, the clause which gave rise to all sorts of complications on the subject issue was worded thus :-
“(v) production of goods on behalf of the client;”.
Job worker will be covered only now ?
The Finance Bill 2005, clause 88 carries the following substitution,
“(v) production or processing of goods for, or on behalf of, the client;”
Usage of the term “processing of goods for or on behalf of” will mean to say that even job workers operating under either of these notifications 214/86 CE, 83/94 C.E, 84/94 C.E are all required to pay Service Tax. This amendment would come into force only after enactment of the Finance Bill 2005.
For the time being, there is no need to worry, an exemption notification numbered 8/2005-Service tax dated 01st March 2005 is issued.
It stipulates that the exemption shall apply only in cases where such goods are produced using raw materials or semi finished goods supplied by the client and goods so produced are returned back to the said client for use in or in relation to manufacture of any other goods on which appropriate duty of excise is payable.
Dhoom – the rider mania
The riders to the notification are disguised as Explanations (I) and (ii) respectively.
Explanation I lays down the condition that production of goods should not amount to manufacture in terms of section 2(f) of the CEA’44 and Explanation II states that appropriate duty of excise shall NOT include Nil rate of duty or duty of excise wholly exempt.
No need for worry as far as Explanation (I) is concerned because clause 65(19) defining “business auxiliary service” as it stands today already excludes from its purview such activity which amounts to manufacture in terms of Section 2(f) of the CEA’44.
However, Explanation II is a cause for concern.
All job workers operating in terms of notification 83/94 C.E, dated 11.04.1994, and who produce goods on job work basis for the supplier operating under the small scale exemption notification 8/2003 C.E, dated 01.03.2003 would unfortunately be disentitled for any exemption.
And by the by, does this mean to say that job workers are already covered under Service Tax category “Business Auxiliary Services”, substitution or no substitution.
The TRU letter issued recently also does not reveal anything. In fact on page 12, serial number 11, it is mentioned that Business Auxiliary Service will include production or processing of goods for or on behalf of the client and on this expanded service Service Tax will be leviable only from the date to be notified after the enactment of the Finance Bill. But wasn’t “production” of goods on behalf of the client already notified?
Source: TIOL News Service.