Service tax on sub contractors

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This query is : Resolved

VISHAL JAIN (Querist)

05 February 2016 one of my client says that if main contractor pays service tax then sub contractors is not liable to service tax is its justified? pls give some case law to support my contest that service tax is stage to stage basis

Arun Kumar Singh

Arun Kumar Singh (Expert)

07 February 2016 If sub contractor turnover is more than 10 lakhs then he need to pay service tax.

VISHAL JAIN

VISHAL JAIN (Querist)

08 February 2016 but sir the client is already deposited the service tax amount and they says in that case you not have to pay because in double taxation in same thing is not possible for this they give some cestat cases

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

24 July 2025 This is a common point of confusion — whether sub-contractors in a chain of service providers are liable to pay service tax if the main contractor has already paid it.

### Key points and explanation:

1. **Service tax is levied on each taxable service provider separately**
Service tax is **a tax on service rendered**, and it applies to each distinct service provider who satisfies the threshold limit (turnover above ₹10 lakh).
So, even if the main contractor pays service tax on their service, the sub-contractor is liable to pay service tax on the service they provide to the main contractor (if taxable).

2. **No double taxation exemption on the same service**
The argument that the sub-contractor should not pay service tax because the main contractor has already paid it **is not valid** unless the services are one and the same and fall under a composite supply exempted from tax.

3. **Service tax is stage-wise, not on the finished service only**
Every stage where taxable service is provided, service tax applies separately.

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### Supporting Case Laws and References:

* **CST v. Associated Builders and Contractors (India) Pvt Ltd. (2010-TIOL-355-SC-CX)**
The Supreme Court clarified that service tax liability arises on the taxable service provider and is not transferable to others in the chain.

* **CCE v. Larsen & Toubro Ltd. (2010-TIOL-1550-CESTAT-MUM)**
Held that sub-contractors providing taxable services must discharge their service tax liability independently.

* **CCE v. Voltas Ltd. (2008-TIOL-522-CESTAT-MUM)**
Also supported that sub-contractors who provide taxable services are liable to pay service tax regardless of the main contractor's compliance.

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### Summary:

| Scenario | Liability |
| -------------------------------- | ----------------------------------- |
| Sub-contractor turnover > ₹10L | Sub-contractor must pay service tax |
| Main contractor pays service tax | Does not exempt sub-contractor |
| Both liable separately | Service tax is stage-wise |

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### Bottom line:

Your client's claim that sub-contractors are exempt because the main contractor paid service tax is **not justified**. Service tax liability is on every taxable service provider in the chain.

If you want, I can help draft a detailed note or provide further references to support your case. Would that help?

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