Service Tax on Sub-contractor - works contract

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This discussion clarifies service tax exemptions for sub-contractors involved in works contracts. It specifically addresses whether a sub-contractor executing part of a contract with a government authority (BWSSB) is eligible for exemption under Notification No. 25/2012. The consensus is that both the main contractor and the sub-contractor can claim exemption, particularly under clause 29(h) if the principal contractor is providing an exempt service to the government.

Sharan KB

Sharan KB (Querist)
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09 August 2021 Dear sir/madam,

case goes like this.

1st Leg:
X-company initially enters a contract with BWSSB (Bangalore Water Supply and Sewerage Board) which is Governmental Authority.

2nd Leg:
where X-company further executes sub-contract to Y-company partially.

Questions:
Here who is eligible for exemption under Service Tax under theNotification No. 25/2012-Service Tax dated- 20th June, 2012, para 12A(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

Whether both dealer eligible Service Tax exemption?

Note:
Contract work is underlaying pipeline.
where contract agreement contains as agreement for replacement/rehabilitation does these words constitute as Original works as provided under above cited notification?

Thank You in advance !

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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09 August 2021 Yes, both contractor eligible for exemption.

Sharan KB

Sharan KB (Querist)
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10 August 2021 Sir thank very much and please let me know is this comes under 12A(a) above notification?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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10 August 2021 12(e) will be applicable for you.

Sharan KB

Sharan KB (Querist)
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11 August 2021 Respected CA R SEETHARAMAN,

Can you please give me any evidence to justify this matter so that even sub-contractor is eligible to claim under 12(e) of notification No.25/2012.

Thank very much for your valuable opinion sir.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2021 29(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt[Notification No. 25/2012-ST, dated 20.06.2012]

The above entry makes it clear that if the principal contractor is providing an exempt works contract service [for example providing works contract service to Government] then in such case if some part of the works contract is sub-contracted then the sub-contractor would also be exempt from payment of service tax

Sharan KB

Sharan KB (Querist)
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11 August 2021 Dear sir,
Thanks for making it very clear and much appreciated !!

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2021 Spending my retired life usefully.

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