Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)
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Circular No. 138/07/2011 – Service Tax
New Delhi, the May 2011
To
Chief Commissioners of Central Excise & Customs (All)
Chief Commissioners of Central Excise (All)
Director General of Central Excise Intelligence
Director General of Audit & DGST
Commissioners of Service Tax (All)
Madam/Sir
Subject: Representation by Jaiprakash Associates
Limited, Noida, in terms of Judgement dated 14.02.2011 in W.P. No. 7705 of 2008
– regarding
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The Works Contract service (WCS) in respect of construction of Dams, Tunnels,
Road, Bridges etc. is exempt from service tax. WCS providers engage
sub-contractors who provide services such as Architect’s Service, Consulting
Engineer’s Service, Construction of Complex Service, Design Services, Erection
Commissioning or Installation Service, Management, Maintenance or Repair Service
etc. The representation by Jaiprakash Associates Limited seeks to extend the
benefit of such exemption to the sub contractors providing various services to
the WCS provider by arguing that the service provided by the sub contractors are
‘in relation to’ the exempted works contract service and hence they deserve
classification under WCS itself.
- The matter has been examined.
- Section 65A of the Finance Act, 1994 provides for classification of
taxable services, which mentions that classification of taxable services
shall be determined according to the terms of the sub-clauses (105) of
section 65. When for any reason, a taxable service is prima facie,
classifiable under two or more sub-clauses of clause (105) of section 65,
classification shall be effected under the sub-clause which provides the
most specific description and not the sub-clauses that provide a more
general description.
- In this case the service provider is providing WCS and he in turn is
receiving various services like Architect service, Consulting Engineer
service, Construction of complex, Design service, Erection Commissioning or
installation, Management, maintenance or repair etc., which are used by him
in providing output service. The services received by the WCS provider from
its subcontractors are distinctly classifiable under the respective sub
clauses of section 65 (105) of the Finance Act by their description. When a
descriptive sub clause is available for classification, the service cannot
be classified under another sub clause which is generic in nature. As such,
the services that are being provided by the sub contractors of WCS providers
are classifiable under the respective heads and not under WCS.
- Attention is also invited to
CIRCULAR NO 96/7/2007-ST, dated 23rd
August, 2007 regarding clarification on technical issues relating to
taxation of services under the Finance Act, 1994. The relevant portion is
reproduced below,-
| 999.03 /23.08.07 |
A taxable service provider outsources a
part of the work by engaging another service provider, generally known
as sub-contractor. Service tax is paid by the service provider for the
total work. In such cases, whether service tax is liable to be paid by
the service provider known as sub-contractor who undertakes only part of
the whole work. |
A sub-contractor is essentially a taxable service
provider. The fact that services provided by such sub-contractors are
used by the main service provider for completion of his work does not in
any way alter the fact of provision of taxable service by the
sub-contractor. Services provided by sub-contractors are in the nature
of input services.
Service tax is, therefore, leviable on any taxable services provided,
whether or not the services are provided by a person in his capacity as
a sub-contractor and whether or not such services are used as input
services. The fact that a given taxable service is intended for use as
an input service by another service provider does not alter the
taxability of the service provided. |
- Therefore, it is clarified that the services provided by the
subcontractors / consultants and other service providers are classifiable as per
Section 65 A of the Finance Act, 1994 under respective sub clauses (105) of
Section 65 of the Finance Act, 1944 and chargeable to service tax accordingly.
Yours faithfully
(Deepankar Aron)
Director (Service Tax)
CBEC, New Delhi
F. No. 137/57/2011 – Service Tax