Works contract services provided by sub-contractor in exempt works contract services, exempt from service tax

0 comments Friday, August 17, 2012
Recently I received a query that under the negative list of services regime whether in a works contract service which is exempt from service tax, sub-contractor would also be exempted from payment of service tax?

The answer to the above question is being provided under serial No. 29 sub-clause (h) of the mega Notification, which provides that service provided by following person in respective capacities are exempt from service tax :

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt[Notification No. 25/2012-ST, dated 20.06.2012]

The above entry makes it clear that if the principal contractor is providing an exempt works contract service [for example providing works contract service to Government] then in such case if some part of the works contract is sub-contracted then the sub-contractor would also be exempt from payment of service tax.
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