Sub contractor- exemption from service tax

[AJAY AGRAWAL]

One of the contractor has been awarded the trunkey work of renovation of STATIDUM . The award letter clealy state for reimbusement of service tax. The Contract was awarded prior to 01.03.2008 and contactor was paying 2 % under composition scheme. From 01.03.2008, the contractor is paying 4 % as service tax besides the work contract tax i.e VAT . The subcontractor are also claiming the service tax from the contractor. My QUERY IS : 1. Whether, such sub contractor can avail the expemption from service tax , being sub contract. 2. If the contractor has to pay the service tax on subcontract, Will he claim the CENVAT Credit under composition scheme

AI Summary

Service tax liability applies to both contractors and subcontractors; composition scheme bars CENVAT credit under the regime.
Subcontracting does not exempt the subcontractor from service tax; tax is chargeable on both contractor and subcontractor for their respective taxable services. Reimbursement terms do not remove the subcontractor's tax obligation. If a contractor or subcontractor has opted for the composition scheme, they are not entitled to claim CENVAT credit, and where both opt for composition, neither may claim such credit.