Sub contractor liability on service tax.

[JIMUTA SAHOO]

Where the main contractor and sub-contractor both are invoved in same contract. In this case whether main contractor is liable to pay service tax.

[rakshit verma]

In this regard, pl.see service Tax Circular dated 06.5.2011.Both are liable to pay service tax. However, main contractor may avail cenvat credit of service tax paid by sub-contractor on services rendered by him

 

Rakshit Verma

Advocate

[rajkumar shukla]

But Nofn.1/2006 does not permit cenvat credit?

[Vijay kumar]

As per CBEC Circular dt. 23.8.2007, if part of the work is entrusted to sub-contractor, the service tax paid by the sub-contractor can be taken as credit by the main contractor since it is an input service for him. However, if the entire work is entrusted to the sub-contractor, the entire service stands rendered by the sub-contractor and he shall be liable to pay the tax and the main contractor cannot take the credit since he doesn't provide any output service. As regards Nofn.1/2006-ST, if it is a case of part work done by the sub-contractor, credit can be taken by the main contractor but the service tax has to be discharged without availing the benefit of abatement under the said notification.

AI Summary

Service tax liability: both main contractors and sub-contractors can be liable, with credit rules depending on extent of subcontracting.
Both main contractors and sub-contractors are separately liable for service tax on services they render. If part of the work is subcontracted, tax paid by the sub-contractor is available as cenvat credit to the main contractor as an input service. If the entire work is subcontracted, the sub-contractor alone is the service provider and the main contractor cannot claim credit. Where credit is taken for part-work, the main contractor must discharge tax without availing the abatement under the relevant notification.