13 March 2009
We have raised a works contract invoice of Rs 10,00,000 included 50% material & 50%service. in this regards I would like to know the following? 1. Is service tax applicable on above transaction & what %? 2. If we paid Excise on full value of invoice i.e. Rs.10,00,000/- and not paid service tax will do? 3.We are subcontractor in this works contract and if main contractor pays the service tax on our behalf will do?
13 March 2009
Is sub contractor exempted from Service Tax?
It is generally understood that a sub contractor providing services to the main contractor is exempted from service tax in view of clarifications issued by the Central Board of Excise and Customs. But, is it really so? The relevant aspects have been discussed in the following paragraphs:
1. In para no. 3.4 of its circular no. No. B 43/5/97-TRU dated 2-7-97 (corresponding to Para 4.4 of the TRADE NOTICE NO. 53 CE (SERVICE TAX)/97 dated 4.7.97) for an the issue of service tax on "Consulting Engineer" the board has clarified that: -
4.4 The services should be rendered to a client directly, and not in the capacity of a sub-consultant associate consultant to another consulting engineer, who is the prime consultant. In case services are rendered to the prime consultant, the levy service tax does not fall on the sub-consultant, the levy service tax does not fall on the sub-consultant but is on the prime of main consulting engineer who raises a bill on his client (which include the charge for services rendered by the sub-consultant).
2. In Question no. 2.3 of Frequently Asked Questions answered by the CBEC in the month of October 2003 in the Second Part under the heading "service specific issues with reference to services introduced in the tax net in year 2003-04", in respect of "maintenance and repair service" it has been clarified that: -
Q.2.3) If there is a total sub-contract of the service, whether sub-contractor is supposed to take out a registration and discharge the tax liability?
Ans: The sub-contractor need not take a registration under service tax. In all such cases, service tax is to be paid by main service provider.
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