Services provided by sub-contractor to a main contractor

[THYAGARAJAN KALYANASUNDARAM]

Is the service provided by a sub-contractor to a main contractor liable to service tax, when the main contractor provides an exempted service? If yes, the main contractor can't claim ITC on the inputs as he is providing an exempted service. In this case, it is an ultimate cost to the main contractor. Please clarify what can be done on this.

AI Summary

Are Sub-Contractor Services Taxable When Main Contractor's Service is Exempt? Check Negative List & Mega Exemption. A discussion on a forum addressed whether services provided by a sub-contractor to a main contractor are subject to service tax when the main contractor offers an exempted service. It was noted that if such services are taxable, the main contractor cannot claim input tax credit (ITC) on inputs, increasing their costs. Respondents advised consulting the Negative List and Mega Exemption under the Finance Act, 1994, and Notification No. 25/2012 for clarity. It was highlighted that sub-contractor services related to works contracts might be exempt, but other services could still be taxable unless specified otherwise.