Packaging activity – It means packaging of goods including pouch filling, bottling, labeling or imprinting of the package, but does not include any packaging activity that amounts to ‘manufacture’ within the meaning of the Central Excise Act, 1944.

Date from which service tax is payable– 16^th June, 2005

Service provider – Any person

Service receiver – Any person

Scope of taxable service – Any service provided or to be provided to any person, by any other person, in relation to packaging activity is a taxable service.

Now some exceptional cases –

1.  No service tax if packaging is ‘manufacture’ – When a person manufactures a product for other person (like brand name owner or raw material supplier), he will not be liable to pay service tax. As long as it is ‘manufacture’, packaging service will be exempt.

2.  Packaging on job work basis – If packaging is done on job work basis, tax may become payable if packaging does not amount to ‘manufacture’. This would be so even if the material is sent under Cenvat provisions and the manufacturer agrees to pay duty on final product. However, if packaging amounts to manufacture, the service will be out of service tax net.

3.  Packaging in case of deemed manufacture – In some cases, packaging is a process of ‘deemed manufacture’. So service tax is not liable on such packing.

4.  Packing of manufactured goods is not ‘manufacture’ and service tax leviable –  If goods already ‘manufactured’ are simply packed, it cannot be said to ‘manufacture’ under Central Excise provisions and hence are taxable.

Exempted Form Packaging Services-

• Services provided to GTA (Goods Transport Agency) – Packing services provided to GTA have been exempted. It is subject to a condition that service provider providing services should mention the name, address of the goods transport agency and also the name and date of the consignment note, issued in this behalf.

Further. The service provider must also be providing services which are taxable. In such case, if he is availing Cenvat credit of service tax on common input services, he may end up by paying 8% amount on such exempt services.

Thus the so called ‘exemption’ seems to be a pseudo exemption.