K.R. Srivats

New Delhi, Oct. 5

Distillers engaged in the manufacture of Indian Made Foreign Liquor (IMFL) of various brands on job work basis may have to fork out service-tax on the `job charges' received by them from brand owners.

The Finance Ministry has taken a view that the activity of blending, manufacturing, bottling or labelling on job work basis by a distiller, in respect of IMFL on behalf of brand owner, would be covered under the category of `business auxiliary services'.

The Central Board of Excise and Customs has issued a draft circular to this effect and sought the views of stakeholders on the levy of service-tax on distillers under `business auxiliary services' for manufacture of IMFL on job work basis.

Service-tax expert, Mr J.K. Mittal, said that this issue had been pending since the second half of 2004 and that the Finance Ministry has now through the draft circular taken the view that such services are in the nature of business auxiliary services and therefore attract service tax.

He also pointed out that the job worker might pass on the service tax levy to the brand owner, who would not be able to set-off this tax as manufacture of IMFL being potable alcoholic beverage was outside the scope of central excise law.

(This article was published in the Business Line print edition dated October 6, 2006)
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