St applicability for sub contractors for foundation work

This query is : Resolved

Abhijith (Querist)
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27 May 2013 I request the expert to help me.

My client has a contract to do foundation work for a cell phone tower construction company.

suppose :

"A" is the cell phone tower construction company.
"B" is my client : a sub contractor only for the purpose of site formation and foundation work.
"C" is a local sub contractor(mason) hired by my client to do the entire site formation and foundation work.

There is a confusion regarding the service tax liability. Points to be noted are :

1. In the sub-contractor agreement "A" mentions that the quotation is inclusive of all taxes( ST has to be grossed up).

2. "C" is an unregistered service provider as his turnover does not cross 10lacs.

3. "B" has taken the sub contract from "A" and further sub contracted it to "C" for a profit margin of 5%. ( for eg: contract from "A" Rs.100 inclusive of all taxes. Contract to "C" by "B" @ Rs.95.)

4. If my client ends up being liable for service tax he will end up in a loss as his margin is only 5%.

5. Who is the principal contractor that will be finally liable under ST.

6. If my client is liable can he get CENVAT CREDIT for the service tax portion he pays ?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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14 July 2013 First of all you should understand the applicability of service tax.

The service tax is charged by the persons, firms and companies and all other persons who have turnover exceeding 10 L. If TO does not exceed 10L then No ST. In the last case when TO is below 10L no ST but otherwise it is to be charged and paid.

Now, the last service provider is not charging ST as his TO is below 10L but coming up to other contractors it si chargeable say Y charges from X and X from A then Y will pay whatever he has charged but X will pay only the amount which he has charged after deducting whatever he has paid to Y and so on.