service tax -sub contractor

[MUKUND THAKKAR]

one of my client have received order of metro rail project for supply and erection, said order is received on following manner.

1. Order issued by Govt, to party A.

2.Party is awarded order to different party Say. B & C

3.B & C is awarded to my client say D.

As per mega exemption serial no 14. of 25/2012. said services is taxable as per Budget change.service tax is applicable from 01.03.2016.

nowe my question is service tax applicable to my client -D who will act as sub contractor?

[KASTURI SETHI]

Sh.Mukund Thakkar Ji,

Sir, Service Tax is applicable to your client. D will provide service to A. De facto, D is sub-contractor. Pl. see serial no.29 (h) of Notification No.25/12-ST dated 20.6.12. Sub-contractor is exempt from ST only if the service of main contractor is exempt. If the service of main contractor is taxable, then service of sub-contractor is also taxable. In this case as mentioned by you, services are taxable. It may be revenue neutral exercise, Service Tax has to be paid by sub-contractor.

[MUKUND THAKKAR]

Thank you Very much Sh. Kasturi Sethiji

AI Summary

Sub-contractor service tax liability: subcontractor must pay service tax where main contractor's service is taxable. A sub-contractor becomes liable for service tax where the main contractor's services are taxable; exemption for a sub-contractor applies only if the main contractor's service is exempt. Thus, in a chain of awards for supply-and-erection works, the sub-contractor must pay service tax if the underlying contract activity is within taxable ambit.