"Dry Cleaning" includes dry cleaning of apparels, garments or other textile, fur or leather articles, [Section 65 (37)]

Indian Service Tax

Dry Cleaning Service

Effective Date: 16/08/2002

Authority: Notification No. 8/2002-ST, dt. 1/8/2002 (for full text of Notification see under 'Beauty Parlour’)

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions

"Dry Cleaning" includes dry cleaning of apparels, garments or other textile, fur or leather articles, [Section 65 (37)]

"Dry Cleaner" means any commercial concern providing service in relation to dry cleaning, [Section 65 (38)]

Taxable service: Dry cleaning service provided by a dry cleaner in relation to dry cleaning of apparels, garments or other textile, fur or leather articles.

Value of taxable service: Gross amount charged for services of dry cleaning.

Exemptions

• Wet cleaning/Washing provided the dry cleaner clearly mentions it in the bill

• Dyeing, darning, ironing, repairs, in house dry cleaning in hotels.

Person liable to pay: Dry Cleaner.

Head of Account

S1. Code SCCD Minor-head 004400155 Dry Cleaning Services 00440220 Sub-head 00440015501 Tax Collection 00440221 115 Sub-head 00440015502 Other Receipts 00440222 116 Sub-head 00440015503 Deduct Refunds 00440223 115

Main text of Departmental Circular/TN

F. No. B111112002-TRU, Date: 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 sub­clause or clause means clause or sub-clause of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002.

2. 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.

3. 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 ofstain 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 stainless­steel basket. Cloths are washed with a solvent. There may be various types of solvents used for dry cleaning such as perchloroethylene (perc), carbon tetrachloride, trichloroethylene and petrol etc. As the clothes rotate 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 wann 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.

4. 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.

5. 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 service are not taxable provided it is clearly indicated in the bill.