circular 138/07/2011 of service tax

[RAM AVTAR]

We are executing work contract for exempted service (Like Railway, exempted buildings, residential building etc. )From service tax.  We have three options to execute the said contract:

1. Part of the work executed by associate contractor:  There are two type of associate contractor

-          Associate contractor defined in our work order / agreement

-          Associate contractor not defined in our work order/ agreement. 

1. Part / full contract assigned to sub contactor not defined in our work order/ agreement
2. Full contract sub assigned to associate contractor

Please clarify whether in above three circumstances, service tax is applicable on sub contractor / associate contractors.  

Further if subcontractor / associate contractor is liable for service tax, whether main contractor can claim cenvat credit.

AI Summary

Service Tax Applies to Subcontractors in Work Contracts for Exempted Services Under Section 65A of the Finance Act, 1994. A participant inquired about the applicability of service tax on subcontractors or associate contractors involved in work contracts for exempted services, such as railways and residential buildings. They sought clarification on whether service tax applies when the work is executed by different types of contractors and if the main contractor can claim CENVAT credit. The response indicated that services provided by subcontractors are classified under Section 65A of the Finance Act, 1994, and are chargeable to service tax as input services.