This Circular clarifies as to whether the exemption available to the works contract service providers in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, etc., is also available to the sub-contractors who provide works contract service to these main contractors in relation to those very projects.
By Circular No. 138/07/2011 — Service Tax, dated 6-5-2011 it was clarified that the services provided by the sub-contractors/consultants and other service providers to the works contract service (WCS) provider in respect of construction of dams, tunnels, road, bridges, etc. are classifiable as per section 65A of the Finance Act, 1994 under respective sub-clauses (105) of section 65 of the Finance Act and are chargeable to service tax accordingly.
It is thus apparent 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.
However, it is also apparent that in case the services provided by the sub-contractors to the main contractor are independently classifiable under WCS, then they too will get the benefit of exemption so long as they are in relation to the infrastructure projects mentioned above. Thus, it may happen that the main infrastructure projects of execution of works contract in respect of roads, airports, railways, transport terminals, bridges tunnels and dams, is sub-divided into several subprojects and each such sub-project is assigned by the main contractor to the various sub-contractors. In such cases, if the sub-contractors are providing works contract service to the main contractor for completion of the main contract, then service tax is obviously not leviable on the works contract service provided by such sub-contractors.
