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

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.