works contract

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asha (Querist)
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22 February 2010 Is the sub-contractor providing any service in relation to the execution of works contract in respect of roads,airport ,railway liable for service tax if the main contractor in not liable.

CA Ashok Kumar Sahu

CA Ashok Kumar Sahu (Expert)
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22 February 2010 Sub contractor is also providing the same exempted service so service tax is not payable to sub contractor also.

asha

asha (Querist)
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23 February 2010 thanks but can you elobrate this along with any section,circular or notification.

asha

asha (Querist)
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23 February 2010 thanks but can you elobrate this along with any section,circular or notification on which we can rely.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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03 August 2025 Certainly! Here's an elaborated explanation with relevant legal provisions and notifications regarding the **service tax liability of sub-contractors** in works contracts for **roads, airports, railways**, when the **main contractor’s service is exempt**.

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## Question:

**Is the sub-contractor liable to pay service tax if the main contractor is exempt for works contracts relating to roads, airports, railways?**

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## Detailed Explanation:

### 1. **Exemption of Works Contract Services for Certain Infrastructure Projects**

Under **Notification No. 25/2012-ST dated 20.06.2012**, certain works contract services provided to the Government or local authority for specific infrastructure projects are exempt from service tax. Examples include:

* Roads
* Airports
* Railways
* Other specified infrastructure

The relevant entries in the notification (like **Entry 12 or 12A**) grant exemption to **works contract services** provided to the Government or local authority for these projects.

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### 2. **Sub-Contractors and Exemption**

* Entry **29(h)** of the same Notification 25/2012-ST states:

> *“Services provided by a sub-contractor to the main contractor providing works contract services which are exempt under this notification” shall also be exempt.*

This means:

* If the **main contractor’s service is exempt** because it is for exempt infrastructure projects,
* Then the **sub-contractor’s services**, insofar as they relate to execution of that contract, are also exempt.

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### 3. **Legal Basis**

* **Section 65(105)(zzzzw)** of the Finance Act, 1994 defines “works contract service.”
* **Notification 25/2012-ST** specifies the exemption entries.
* The exemption is **cascading** — i.e., the sub-contractor providing service to the main contractor for the exempted works contract is also exempt.

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### 4. **Circular / Clarification**

* The **Central Board of Excise & Customs (CBEC)** has clarified via various circulars and clarifications (for example, in **CBEC’s Education Guide**) that:

> *Sub-contractors providing services to a main contractor who is exempt under Notification 25/2012-ST will also be exempt under Entry 29(h).*

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### 5. **Summary**

| Situation | Service Tax Liability |
| ---------------------------------------------------------------------- | --------------------------------------------------------- |
| Main contractor exempt for works contract on roads, airports, railways | **No service tax payable by main contractor** |
| Sub-contractor working for above main contractor | **Also exempt under Entry 29(h), no service tax payable** |

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## Useful References:

| Document | Description |
| ------------------------- | ------------------------------------------------------------------------ |
| Notification 25/2012-ST | Exemption notification for works contract services including Entry 29(h) |
| Section 65(105)(zzzzw) | Definition of works contract service |
| CBEC Education Guide 2012 | Clarifications on works contract and sub-contractor exemption |

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If you want, I can help you get the exact text of these notifications or draft a detailed note for your records. Would you like that?

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