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.

[YAGAY and SUN]

Dear THYAGARAJAN KALYANASUNDARAM,

Please check the Negative list and Mega Exemption in this regard. Such scenarios are specifically mentioned.

Regards,

YAGAY and SUN

(Management, Business & Indirect Tax Consultants)

[Ganeshan Kalyani]

Dear Thyagarajan ji,

you can find negative list u/s 66D of the Finance Act, 1994 and Mega exemption under notification no.25/2012 as amended from time to time.

regards,

ganeshan

[CS RAHUL AGARWAL]

Sir,

To my understanding, it is only in relation to WCT that service provided by sub-contractor to principal contractor is exempted.

Clause 29 of 25/2012 read as:

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;

So other services would be taxable unless otherwise contrary provided elsewhere, and in that case main contractor can even claim ITC. Others view soliciated.

[KASTURI SETHI]

2015 (38) S.T.R. 583 (Tri. - Del.) = 2015 (2) TMI 971 - CESTAT NEW DELHI

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

Shri Manmohan Singh, Member (T)

R.B. CHY RUCHI RAM KHATTAR & SONS

Versus

COMMR. OF S.T., NEW DELHI

Final Order No. A/54936/2014-ST(SM), dated 29-9-2014 in Appeal No. ST/56911/2013-ST(SM)

[Ganeshan Kalyani]

Kasturi hats off to your hard work in finding out the case which very much clarifies and answer the query very well. Thanks.

[Ganeshan Kalyani]

Sorry sir I have just posted in hurry by mentioning your name only. Please read as Kasturi Sir.

AI Summary

Exemption for subcontracted works contract services may apply when supplied to a contractor providing exempt works contract services.
Subcontracted works contract services supplied to a contractor rendering exempt works contract services are specifically exempt under the Mega Exemption notification; other subcontractor services remain taxable unless expressly exempt, and when taxable the main contractor may claim input tax credit on inputs and input services used for the taxable activity.