If Service Tax Paid on Output Service, connected input service exempted

[Ramesh M]

Dear Experts,

If we pay Service Tax on output service of Erection & Commissioning, connected service done by a sub contractor, is there any exemption for him, since we are paying tax on final output service.

AI Summary

Sub-contractors must pay service tax even if the main contractor pays on final output; credits are claimable. A query was raised regarding whether a sub-contractor is exempt from paying service tax if the main contractor pays service tax on the final output service of Erection & Commissioning. The responses clarified that the sub-contractor is liable to pay service tax on the services they provide. The main contractor can claim credit for the service tax paid by the sub-contractor. According to a CBEC circular, sub-contractors are taxable service providers, and their services are considered input services. If the main contractor is liable for service tax, the sub-contractor is also liable unless the main contractor's services are exempt.