Service tax on sub contractor when main contractor is exempt

If main contract is exempt, sub-contract is also exempt.

Unnikrishnan Sir,

As per Sl. No. 29 of notification 25/2012, sub-contractor is exempt from the service tax only in case of works contract right?

This service explained as above, does not seem to be in the nature of works contract. Can you please clarify?

This service does not fall under works contract but the sub contractor is providing the same service as the main contractor.

You are correct CA Ganesh. If it is not works contract, the exemption is not available.

Thank you sir for your update. Our client is a Public Limited Co. and deals in waste management. They get contracts from various MCDs for collection and disposal of municipal solid waste and hence were exempted under service tax from the inception of the Co. Since inception, they have been sub contracting the entire contract to specific sub- contractors of the area. for eg: they have one sub contractor for Gwalior, who carries out the entire collection and disposal of waste in gwalior, similarly they have one for Nagpur and one for jodhpur. The services of the sub contractors were previously exempted under intermediary services. However, if the sub contractors charge service tax now , there will be huge burden on the Co and they will not be able to take any credit either as they themselves are exempted. My quiery is -

Can the sub contractors continue to take exemption as earlier by informing the deptt.on the plea that -

1. service tax is on nature of service and not on nature of contract. therefore when the service is ultimately rendered to MCD, the service of the sub contractor should be exempt.

2. service tax act never discussed about any other contracts other than works contract. thus if under works contract , sub contractor is exempt, it should be assumed that under other contracts also sub contractor providing exactly the same service as the main contractor , should be exempt.