Works Contract

[Rushi Upadhyay]

Respected Members,

I have a query w.r.t. works contract service.

As per amendments in Mega Exemption Notification No. 25/2012-ST, works contract entered into after 01.04.2015 is not exempted as Sr. 12 (a)(c) and (f) was omitted. However new Sr. No. 12A was inserted with retrospective amendment from 01.03.2016 and work order entered into prior to 01.04.2015 was made exempted again.

Now the issue is my client has entered in sub-contract and sub-contract was entered into after 01.04.2015 but main contractor was allotted the work in 2014 only and we have claimed the exemption vide Sr. No. 29(h) of mega exemption notification which interealia reads as under:

‘29. Services by the following persons in respective capacities –

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

and therefore argument was putforth that when the main contractor is exempt than sub-contractor would also get exempted and it does not affect the taxability on the part of sub-contractor even contract of sub-contract with main-contractor is entered after 01.04.2015.

I am searching for case laws where similar situation was occurred but not able to find the same.

Any of the member can help would be highly appreciated.

Thanks in advance.

AI Summary

Works contract exemption scope: whether sub-contractor relief follows main contractor's pre-cutoff contract under exemption rules.
Whether a sub-contractor is exempt under Sr. No. 29(h) when the main contractor's principal contract was entered before the exemption cutoff but the sub-contract was executed after depends on the textual scope of the Mega Exemption Notification and transitional relief. Sr. No. 29(h) does not expressly require the sub-contract to predate the cutoff, suggesting exemption may follow the main contractor, while a strict-construction approach and the limited temporal reach of the later Sr. No. 12A raise potential gaps for the interim period; Section 102 and procedural defects in notices are cited as additional defenses.