Consequences of payment of service tax by a constrution contractor and sub contractor

[paresh zatakia]

Dear Sir, when construcion contractor has paid service tax, but subcontractor has not paid and added in bill to contractor considering that subcontractor has pais,what is the consequence if subcontractor is registered under service tax Regards Paresh Zatakia

[Surender Gupta]

Your query is not clear, is it related to Cenvat Credit or Liability of service tax? Kindly elaborate.

[Madhukar N Hiregange]

There is no specific section or rule which allows that the sub contractor need not pay where the main contractors pays. However some 1997 circulars allowed for the same which have till date not been rescinded. Therefore you maybe able to take a defesne that the same would equally be applicable for constrcution contract. Youy could say that there is no revenue loss. However the critical aspect would be to be able to prove that the main contractor has paid the ST. However if the sub contractor has collected the consideration as ST from the main contractor then as per Section 73A the same would be payable to the Government.

AI Summary

Service tax liability remains with subcontractor if tax was collected, unless main contractor proves actual payment.
Where a main contractor has paid service tax but a subcontractor has not and has billed the contractor claiming to have paid, no specific statutory provision absolves the subcontractor; reliance may be placed on unrepealed 1997 circulars as a defence, but the defence depends on proving that the main contractor actually discharged the service tax. If the subcontractor collected consideration labelled as service tax from the contractor, that amount is payable to the Government under Section 73A, making the issue essentially fact-driven regarding payment and proof.