Service Tax on Textile Processing

Service Tax on Textile Processing w.e.f. 01.07.2012

Q. Whether Service Tax is applicable on various job work processing involved in garmenting i.e. from the stage of Yarn to Garment e.g. yarn dyeing, fabric dyeing, fabric bleaching, washing, fabric or garment dyeing; embroidery; printing; CMT; finishing; packing; other garment etc.

ANSWER :-

a) As per Clause(f) of Sec. 66D of Negative List of services "any process amounting to manufacture or production of goods on which duties of excise are leviable" is not service taxable

b) As per Sl. No. 30 of Notification of 25/2012 -Service Tax dated 20/06/12 printing & textile processing are exempted when carried out as an intermediate production process as a jobwork. 

c) As per Sl No. 30 (c) of Notification of 25/2012 -Service Tax dated 20/06/12 service tax is exempted on job work in relation to  any goods on which appropriate duty is payable by the principal manufacturer

·         * Process amounting to manufacture on which duties are leviable means the process which changes the classification of the resultant product into a classification other than the classification of input product e.g. grey yarn is classified under S.H 5205.11.10 of CET and dyed yarn classified under S.H. 5205.11.30 of CET are different products and therefore conversion of grey yarn into dyed yarn is a process of manufacture for Negative List of Clause (f) of Sec. 66D whereas Mens' Shirt made of cotton falls under S.H. 6205.20.00 of CET before and after washing or dyeing or bleaching or embro. etc. and therefore these processes are not amounting to manufacture and therefore are not a part of aforesaid Clause (f) of Negative List under Sec. 66D. 

                Jobwork of garment packing is also covered as it is necessary to make the garment marketable

·      *    The word "Textile" is not defined either in Service Tax or in Excise Act. As per various Dictionaries "Textile" means a cloth specially one manufactured by weaving or knitting; a fabric or fibre or yarn for weaving or knitting into cloth.  As per dictionary meaning Apparels / Garment cannot be said to be covered under the word 'Textile'.

Sec. XI of Central Excise Tariff has been given a heading namely "Textiles and Textile Articles" meaning thereby  Excise Law identifies Textile and Textile Articles separately but the word 'Textile' cannot draw a meaning from this heading not to include Textile Articles.

The word is well-defined under Textile Committee Act 1963 under Sub-Sec.g of Sec.2 as under :-

"Textile" means any fabric or cloth or yarn or garment or any other article made wholly or in part :-

i) Cotton; ii) Wool; iii) Silk; iv) Artificial Silk and includes fibre.

If the word is not defined in the concerned Act the definition of technical organisation or the meaning which is generally known in the tray is to be considered and therefore the definition given in Textile Committee Act becomes relevant and has to be taken into consideration.

In view of this definition any job processing done on any of the production right from fibre to the garment is textile processing and therefore exempted under Notification 25/2012 dated 20/06/12.

* Cluase 30(c) of the Notification 25/2012 ibid exempts the Service tax on Job work in relation of any goods on which appropriate duty is payable by the principal manufacture.

The word duty is not defined in service tax, ( probably  it is a mistake on the part of drafting that the word duty is used instead of duty of excise and I expect a corrigendum to follow), I presume it to mean duty of excise.

 Accordingly, a principal manufacturer of the Garment with a Brand name is billed for any process in relation to such Garment meant for export  or for  domestic clearance is not liable for service tax.

CONCLUSION - All the processes on any form of textiles whether chargeable to Excise are covered under Negative List and all the processes even if not exisable are covered under Notification 25/2012