tax on sub contract

[RAM AVTAR]

one contractor is executing work contract of a govbernemnt building which is exempt.  part work assigned to associated contractor name given in main contract.  whether associate contractor is also liale to pay service tax as per latest circular of service tax.  further if entire work sub assigned to sub contractor of said building. whether sub contractor is liable for service tax

[Rama Krishana]

There was some doubts among assessee and department and circular has merely clarified that doubt. No new liability has been cast on the sub contractor by issuing this circular.

Any job, whether is executed by the contractor or sub-contractor, the nature of job / service is to be analyzed irrespective of the fact that who is executing it. In your case, the entire contract has been assigned to sub contractor therefore, it is clear that the nature of contract would remain same in the hands of sub contractor as in the hands of contractor.

Therefore, if the contract is eligible for exemption for service tax on the contractor, sub contractor would also be exempted for the same work.

AI Summary

Service tax exemption applies to subcontractors when the underlying contract is exempt; liability follows the nature of service.
The controlling criterion is the nature of the service, not who performs it: a circular clarified that no new liability was created for sub contractors and where the contractor's work is exempt, the sub contractor performing the same work is likewise exempt; assignment or sub assignment preserving the character of the work does not alter tax treatment.