Service Tax on Sub contract

[SANKARA NARAYANAN ME]

ABC Ltd is a Construction Company. This Company subcontract work to another company XYZ Ltd. ABC Ltd receive and pay Service Tax to the central govt. Whether it is mandatory for XYZ to collect Service Tax from ABC Ltd.

[Rajagopalan Ranganathan]

Sir,

The reply is yes. Whatever the service tax paid by XYZ is available as credit and can be utilized by ABC for paying service tax by ABC.

[CS RAHUL AGARWAL]

Dear Sir,

But i have a doubt to it. Why would be the main contractor be liable to pay service tax ? there is no liablity at all as no service is provided by main contractor to contractee. It is the sub-contractor who is liable to pay service tax. the main contractor is only retaining certain profit to the value of contract. Also plz refer judgement of Surya Construction 2014 wherein the same has been reiterated. Please clarify Sir.

[CS RAHUL AGARWAL]

Dear Sir,

for reference plz see this case. wrongly i wrote 2014, its 2015.

2015 (4) TMI 570 - KERALA HIGH COURT

M/s. SURYA CONSTRUCTIONS Versus COMMERCIAL TAX OFFICER (WC & LT) AND STATE OF KERALA

[CS RAHUL AGARWAL]

I mean when, in case of Sale tax when there is no sale then why should be there any liablity for ervice tax ? The service is actually provided by sub-contractor to the contractee. The main contractor merely contracted and outsourced it to sub-contractor, thus no service apparently being provided by main-contractor.

AI Summary

Service tax liability on subcontracted construction services: subcontractor pays and main contractor may avail credit, subject to legal dispute. The subcontractor must discharge service tax on services rendered and taxes so paid are available to the main contractor as input tax credit to offset its service tax liability. An opposing view contends the main contractor should not bear service tax since it did not perform the outsourced service and the subcontractor, as the actual provider to the contractee, alone should be liable.