civil contract

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ankit (Querist)
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28 December 2010 A Builder has sub contracted whole of the project to sub-contractor and payment is made on running bill basis. Advance payment has is received on monthly installment basis from the buyer by the builder.
what will be the service tax liability on both the parties

Shyam Lal Naik

Shyam Lal Naik (Expert)
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28 December 2010 In case composition scheme is not opted, there is no problem. Both are liable to pay tax on their respective receipt. The main contractor is eligible to avail cenvat of the amount paid by the sub-contractor.

However, in case the composition scheme is opted, cenvat is not available. One may argue that, the same self service can not be taxed twice and hence the sub-contractor is not liable.

In a recent sales tax case, it has been held that, once the main contractor has paid vat on transfer of property involved in execution of works contract(commonly referred to as Works Contract Tax), the sub contractor is not liable. Although the facts are different, the ratio may be applied.

How ever, harassment by the department can not be ruled out.