Service Tax on job work
IT appears that the DG, Service Tax has issued a letter to the field to the effect that job workers whose activities do not fall under the definition of manufacture in Central Excise will be covered under Service Tax under business auxiliary service and he wants them all brought under the tax net. He sees considerable revenue potential in this expanded area of Service Tax. It is natural for Revenue officers to be panicky during the last quarter of the year what with an alarming shortfall in collections and pressure from the Minister. And the poor field officers are on the run for that little extra revenue - by all possible means and imposssible. Coming back to Service Tax on job work; the definition of Business Auxiliary Service speaks about production of goods on behalf of the client but does not include any activity amounting to manufacture under Central Excise. Now does this mean that any activity which is not manufacture will attract Service Tax as the DG wants it to? The definition does not seem to say so. It requires production of goods and more importantly on behalf of the client. The job worker actually works for the client, not on his behalf. Even under Central Excise law, the job worker is also an independent manufacturer. The scope of this service (even expanded) seems to cover only production of goods on behalf of the client, not production of goods for the client. If I take paddy to a rice mill and get it converted into rice, is the rice mill producing rice for me, or on my behalf? And is the activity taxable? If so the street corner grinder-wallah who makes my idli flour with my rice or the one who makes my wheat flour are liable to pay Service Tax. The scope is indeed wide!