Service tax liability for a Sub contract from the Main contractor who is rendering Service to the Government.

[vaishali nawandar]

One of my clients is a subcontractor of the Main contractor. The main contractor renders Surveying and Map making Services to the Government which is exempt. Whether the Subcontractor (registered under Service tax) needs to collect the Service tax and pay it to the Govt. Please resolve the query and give specific applicable notifications/Sections/Circulars as early as possible.

[RB SINGH]

It is submitted by you that the service of "survey and map-making" provided by  main contractor is exempted,but you have not provided the relevant  notifications/Sections/Circulars under which their service is exempted. However, it may be a case that the main contractor be an agency under the control of, or authorized by, the Government( like Survey of India)to survey and map-making. If this assumption is correct, then the main contractor is out of purview of the TAX net by virtue of the definition as provided under section 65(105)(zzzc). But in case of your client who provides service to the main agency like survey of India, shall not be eligible  to claim exemption from service Tax leviable on the value of services provided by him, for the reason that your client, probably, is not an  agency under the control of, or authorized by, the Government but a person providing service to the an  agency under the control of, or authorized by, the Government. What is available to an government agency is not available to a service provider providing service to such agency. In short, given the situation, your client need to collect the Tax and deposit to the Government.

 

[vaishali nawandar]

Thank you Mr. R B Singh.

Yes the main contractor comes under the clause of an agency authorized by the Government. Therefore he is exempt from Service tax. I had seen the circular dated 23/08/2007, based upon which it can be said that the Subcontract is liable for Service tax.

If in the main Contractor's agreement with the Govt., it is stated that they are allowed to Subcontract the total task, whether the Sub-contractor could claim the exemption. If yes, in which clause or provision we will fit the case. I also need some case law support for this. If you could provide me the same, I would be really greatful to you.

Thanks, once again. Good Day.

[CASeetharaman KC]

It seems the exemption is availabale only to the main contractor, the sub contractor would have to collect service tax and remit to the government as he is not exempted

AI Summary

Service tax liability: subcontractors remain taxable even where main contractor is a government-authorized agency and must remit tax.
Where a main contractor is an agency authorized by the Government and exempt under the statutory definition (as discussed under section 65(105)(zzzc)), that exemption applies to the government-authorized agency itself and does not extend to a subcontractor providing services to that agency. Consequently, a subcontractor must treat the services it supplies as taxable, collect service tax and remit it, unless the subcontractor independently qualifies for an exemption; administrative circulars cited support that subcontracted services are not automatically exempt.