IS SERVICE TAX APPLICABLE TO SUB CONTRACTOR WHO PROVIDED SERVICES TO SEZ

[Sumeet Tholle]

Dear Sir,

"A"  is unit under SEZ.

"B" is main contractor of "A"

"C" is sub contractor.

"C" entered into agreement with "B" to provide erection, instalation service to "A".

"C" raised the bills to "B" & mentioned about name, address & service provided to "A".

"B" issued work order to "C" mentioning that no Service Tax applicable being unit in SEZ.

Now department raised objection that, "C" provided services to "B" only and not to "A"ie.unit in SEZ hence "C" is responsible to collect & pay service tax from "B" .

Pl. guide.

CA Sumeet Tholle.

 

[Vijay Chitte]

No, exemption is available if service is provided by sub-contractor. However, the issue is arguable, that as per Notification No. 40 / 2012-Service Tax dated 20-06-2012, the service is exempt if it is received by SEZ / SEZ developer. The term used is 'received by and Not 'Provided to'.  The notification does not say that it should be directly received by SEZ unit. Even if provided through main contractor, fact remain that it is ultimately received by SEZ unit. 

As per clause 29(h) notification no 25/2012-ST dated 20-06-2012 w.e.f. 01-07-2012 say that if the main contractor and sub-contractor are covered under works contract, the sub-contractor can claim exemption from service tax if main contractor is exempt from service tax.

[Sumeet Tholle]

Sir,

Thanks.

Sumeet Tholle

 

I AGREE ON THE SAME

AI Summary

SEZ service tax exemption applies to subcontractors when services are ultimately received by the SEZ unit, allowing exemption claims.
The subcontractor providing erection and installation services to an SEZ unit through a main contractor can claim service tax exemption because the exemption applies to services "received by" the SEZ unit, which covers services ultimately received even if provided via the main contractor; additionally, where the work falls under works contracts the subcontractor may claim exemption if the main contractor is exempt.