Manufacture of Alcoholic Beverages on Job Work Basis - Service Tax - Board Clarifies
UNDER section 67 of the Finance Act, 1994, service tax is chargeable on the ‘gross amount charged' by the service provider for providing taxable services. As per CIABC [Confederation of Indian Alcoholic Beverages Companies] the gross value of sales, as per invoices, includes the following elements:
1) Bottling/job charges - paid to CBU
2) Distribution costs including freight, transit insurance etc. – paid to CBU
3) Other reimbursables – paid to CBU
4) Cost of raw materials – paid to CBU
5) Cost of packaging materials – paid to CBU
6) State excise duty and VAT – paid to State Government
7) Surplus/profit – retained by BO
The CIABC has now sought clarifications on the tax base on which the service tax would be chargeable after allowing the deduction provided in the notification. In short, they want to know as to how many of the above 7 elements (para 2 above) would be includible in the value for the purpose of charging service tax.
For removal of doubts and with a view to avoid disputes on valuation, CBEC has clarified that :-
a. Service tax would be payable on the bottling/job charges, distribution costs and other reimbursables.
b. So far as inputs i.e. raw materials and packing materials are concerned, one of the conditions of exemption notification No.39/2009-ST is that there should be documentary proof specifically indicating the value of these inputs. Therefore, service tax on the value of raw materials and packaging materials would be exempt only when such charges are specifically mentioned in the invoice raised/documents maintained by the CBU.
c. As regards the statutory levies, namely, excise duty /VAT, they do not present any ‘consideration' for rendering the service. Whether such amount is paid by BO or by CBU, they have no nexus with the provision of service. As such, these levies will not be included for charging service tax.
d. Similarly, the surplus/profit earned by the BO being in the nature of business profit (which falls within the purview of direct taxes), will not be chargeable to service tax
Board wants the DG, Service Tax to clarify the position suitably to the field formations
CBEC F.No.332/17/2009-TRU Dated: October 30, 2009