Clarification of CBEC in relation to taxability of sub-contractors in exempt works contract services

0 comments Saturday, October 22, 2011
Works contracts relating to construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc.is exempt from service tax. However there was confusion as regard to whether the services provided by sub-contractors to the main contractors of such exempt works contracts are taxable or not.  

CBEC has issued a circular clarifying when sub-contracts in works contracts of  construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc.will not be taxable. It has been clarified that  just because the main contractor is providing the WCS service in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc., it would not automatically lead to the classification of services being provided by the sub-contractor to the contractor as WCS. Rather, the classification would have to be independently done as per the rules and the taxability would get decided accordingly.
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