The services provided by Work Contract Service Providers in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc. are specifically excluded from the definition of taxable works contract service and are thus, not liable to service tax under section 65(zzzza) of the Finance Act, 1994.
Circular No. 138/07/2011 – ST dated 06.05.2011 had clarified that while the main contractor providing works contract services in respect of such infrastructure projects is exempt from service tax, the services provided by its subcontractors would be distinctly classifiable under the respective sub-clauses of section 65(105) of the Finance Act, as per their description and taxed accordingly. It was explained that the sub-contractors providing services to the main contractor would not be automatically exempt from service tax by virtue of providing services to the main contractor who is providing WCS service in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc.
CBEC has now further clarified that though the services provided by the sub-contractors to the main contractor are independently classifiable under WCS, they too will get the benefit of exemption if they are in relation to the infrastructure projects mentioned above.
[Circular No. 147/16/2011 ST dated 21.10.2011] – Service Tax
Source: www.cbec.gov.in and www.taxindiaonline.com
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