Service tax in Works Contract

Dear Ajith,

A sub-conntractor will be liable to Service Tax. He is also a service provider to the main contractor and the service provded by the Sub-Contractor is to be treated as Input Service by the main contractor.

Also, refer to this circular https://www.servicetax.gov.in/circular/st-circular07/st_circ_96-2k7.htm

Thanks,

Ganesh.

Dear Ganesh

The Sub contractor is asking for reimburse the service tax amount. We have already paid the service tax and we cant take credit too . how to solve this

Dear Ajith,

You have opted for composition scheme, hence you are unable to take credit. If you had not opted for composition scheme, then you could have taken the credit and paid service tax at the standard rate of tax.

If you have made the first service tax payment in respect of this project at the composition rate, then you cannot change it for the said project/contract. Hope you would have assessed the benefits of opting for composition scheme.

In the given scenario, you have to pay the service tax demanded by the sub-contractor.

Thanks,

Ganesh