• Understanding the service

  • Under the given taxable category of service, the cleaning of cloths has been brought under the service tax regime. However, only dry cleaning has been brought under the service tax net and not the wet cleaning of the cloths.
  • Dry cleaner normally performs following process as on cloths during the process of dry-cleaning :

(i)    Tagging and inspection—Dry cleaner inspects the cloths and tags them with an identification label.

(ii)   Pre-treatment—A stain remover is applied to remove the stains. Use     of stain remover depends on the nature of stains such as stains of grease, oil, ink, colours, etc. Fabric/cloth is then rinsed and dried.

(iii) Dry cleaning—A dry cleaning machine is a motor driven washer/extractor/dryer and it holds clothes in a rotating, perforated                 stainless steel basket. Cloths are washed with a solvent. There may be various types of solvents used for dry cleaning such as per chloethylene (perc), carbon tetrachloride, trichloethylene and petrol etc. As the clothesrotate in the perforated basket, there is a constant flow of clean solvent from the pump and filter system. After cleaning, the clothes are drained to expel the solvent and then goes into a dry cycle by circulating warm air.

(iv) Post spotting—If there is any spot/stain left after the dry cleaning, it is removed using water or any other appropriate chemical.

 

[Para 3, Circular F.No.B.11/1/2002-Tru, Dated 1-8-2002 [Annexure X]

  • Accounting codes

Such codes are no longer statutory but used for statistical purpose for the purpose of registration and for payment of tax as specified vide Circular No.165/16/2012 –ST dated 20.11.2012:

 

Tax Collection of Service Interest and penalties on such service
00440221 00440222

  • Taxability as settled by precedents / Circulars / Trade notices

Activity Whether falls within the scope of present service Reference
Dyeing, darning etc No Circular F.No.B 11/1/2002-TRU, dated 01.08.2002
Wet cleaning, washing No Circular F.No.B 11/1/2002-TRU, dated 01.08.2002

CCE, Bhopal V New Nagpur Dry cleaners 2009 (15) STR 215 (TRI.DEL)

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Fashion Designer Services, no specific provision for determination of taxable value has been provided.  However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Thus, the value of taxable Dry Cleaning Services is to be determined in terms of provision of Section 67 read with the prescribed Rules.

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

  • Exemptions available

  1. General Exemption
  • Small Service Provider

Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.

  • Import of Technology

Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986. 

  • To Foreign Diplomatic missions and their personnel

Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.

  • Services by TBI or STEP

Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted

  • Services provided to SEZ

Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.

  1. Specific Exemptions:

No Specific Exemption had been granted by the government in case of Dry Cleaning Services.

  • Related Circulars and Notification

  • Circular F.No.B.11/1/2002-Tru, Dated 1-8-2002
  1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub-clause or clause means clause or sub-clause of section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002.
  1. As per clause (31), “dry cleaning” includes dry cleaning of apparels, garments or other textile, fur or leather articles. As per clause (32) “dry cleaner” means any commercial concern providing service in relation to dry cleaning. The taxable service, as per clause (90)(zt) is any service provided to a customer, by a dry cleaner in relation to dry cleaning.
  1. Dry cleaner normally performs following process as on cloths during the process of dry-cleaning:

(i)    Tagging and inspection—Dry cleaner inspects the cloths and tags them with an identification label.

(ii)   Pre-treatment—A stain remover is applied to remove the stains. Use of stain remover depends on the nature of stains such as stains of grease, oil, ink, colours, etc. Fabric/cloth is then rinsed and dried.

(iii) Dry cleaning—A dry cleaning machine is a motor driven washer/extractor/dryer and it holds clothes in a rotating, perforated stainless steel basket. Cloths are washed with a solvent. There may be various types of solvents used for dry cleaning such as per chloethylene (perc), carbon tetrachloride, trichloethylene and petrol etc. As the clothesrotate in the perforated basket, there is a constant flow of clean solvent from the pump and filter system. After cleaning, the clothes are drained to expel the solvent and then goes into a dry cycle by circulating warm air.

(iv) Post spotting—If there is any spot/stain left after the dry cleaning, it is removed using water or any other appropriate chemical.

  1. A point has been raised as to whether service tax is leviable on wet cleaning also. Wet cleaning is a process of cleaning garments in water and water soluble detergent. It is clarified that service tax is leviable only on dry cleaning. Accordingly service tax is not leviable on wet cleaning/washing provided the dry cleaner clearly mentions it in the bill. If details are not mentioned in the bill, it would normally be understood that clothes have been dry cleaned and in such situation service tax is liable to be paid.
  1. A point has been raised whether service tax is payable on the job of dyeing, darning etc. It is clarified that since these activities are not dry cleaning, these services are not taxable provided it is clearly indicated in the bill.

 

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