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Service tax on subcontractor of expmpted services

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Mohammad Ayub

Partner

29 Points Posted on 20 June 2015

A private Limited Company "X" has got a contract for lying of railway lines. "X" subcontracted to "Y" ( a private limited company) the whole work. "Y" requires ballasts (small stones to make the base on which the lines are to be laid. These are made out of crushing the big size stone boulders).

1. "Y" made an agreement with "Z" ( a private limited company) to supply the boulders with local VAT.

2. "Y" made another agreement with "Z" for crushing such boulders to ballast.

IF "Z" is liable to pay service tax for crushing such boulders to ballast?

Regards,

CA Mohammad Ayub

Replies (1)

DDDDDD

120 Points Posted on 21 June 2015

As per Entry No (F) of Section 66D of Finance Act "any process amounting to manufacture or production of goods" covered within the ambit of Excise duty is not liable to Service tax.

As per Hindustan Construction Co Ltd., the process of crushing of boulders into small stones amounts to manufacturing activity. Thus the above mentioned activity by you is covered under negative list and not subject to service tax.

https://indiankanoon.org/doc/34453/