exemption of works contract service provided by subcontractor to maincontractor , who's works contract service is exempted

[shrikanth shetty]

ours is a partnership firm .  we are providing works contract service ( Original works )  to m/s  'A'  a Body corporate in a specified SEZ .  M/s  'A' got that works order   from m/s 'B'  which is a  company & developer of  a SEZ. . As per form A-1 & A-2  furnished by M/s B' to M/s 'A' , the works contract service provided by 'A'  to 'B' in the SEZ is exempt from service tax .   But m/s 'A' subcontracted the same work to us . we are issuing bill to m/s 'B'  mentioning the work details executed at SEZ area aginst particular work order.

please clarify me whether we can claim exemption from service tax on the works contract & labour contract  service  provided at SEZ ,  to m/s 'B'  on the strength of  sl.no. 29 (h)  of notification no 25/2012 ST  dtd. 20/06/2012 

[ROHAN THAKKAR]

Dear Sir,

If M/s A is a body corporate and provides services in SEZ, then they are not required to pay service tax subject to compliance of Notification No. 12 / 2013-Service Tax. One of the condition is that Form A-2 should be received by M/s. A from SEZ unit or developer.

 Now if the said work has been subcontracted by Mr A to you, then you can also claim exemption thereon by virtue of Clause 29(h) of Notification No 25/2012-ST. It reads as under: '29(h)  sub-contractor providing services by way of works contract to another contractor providing  works contract services which are exempt;'

The exemption is not subject to any qualification except that the said service should be exempt for main contractor. I

Thus, exemption can be claimed under Sr No 29(h) of Ntf 25/2012-ST. 

However, as as matter of evidence, kindly enter into agreement with main contractor so as to avoid dispute in future.

Regards

Rohan

AI Summary

Subcontractor exemption allowed when main contractor's works contract service is exempt; ensure written agreement as evidence. Subcontractors providing works contract services to a contractor whose works contract services are exempt may claim the same exemption under clause 29(h); entitlement depends on the main contractor's exempt status and compliance with SEZ documentation such as Form A-2 and is supported by maintaining a written agreement to evidence the subcontracting arrangement.