Liability of Sub Contractor, Service Tax

[Shyam Naik]

Dear Experts,

The issue is related to services rendered to Coal India by contractors.

It is the practice in the subsidiaries of Coal India to make payment for the service Tax on production of challan as proof of payment of taxes. In some cases, they retain the original challan as well. The Coal India authorities has explained that the modality has been arrived at with active consideration of the Ministry of Finance. This sort of practice is in vouge in other PSUs, both Central and State, as well.

Due to the above practice, the contractors are compelled to pay the taxes in cash. Further, the are not in a position to pay service tax charged by the sub contractors. More over it would be double taxation.

In the above matrix, please advise, whether the department can ask for payment of taxes from the sub contractors, more so, when the above modality has been arrived with the active consideration of Ministry of Finance.

Thank You.

Best Regards,

 

SL Naik

Posts / Replies

[onkar kumar]

Yes, department can demand s.tax from subcontractor. there is no such provision set by ministry of finance. Perhaps, coal india authotrities has made verbal talk with lower authorities of service tax.

[NEERAJ KUMAR, RANCHI]

Dear Mr Naik,

This is a democratic country and govt is run on the basis of written law. If any modality has been arrived at with active consideration or what ever with any body in Ministry of Finance, there must have been some written agreement(or you can call it anythhing), so you can ask for a copy of the same, further if Ministry of Finance come with any procedural changes it is brought out by way of circular and it is not exclusively and hiddenly issued for any one assessee. You can directly ask for such clarification from the department also, where you can get a clear and obvious reply.

As far as youur question is concerned that whether departrment can ask for payment of taxes from the sub contractor. I could not make out your query clearly, if subcontractor is charging you service tax, that means they are registered with the department and they must be paying tax to the department so why should department ask for them taxes, if they are not paying the taxes, departmennt will certaily catch them.

 

[Shyam Naik]

Thank You Mr. Neeraj Kumar for your valued reply.

The difficulty is I am the sub contractor. The contractor have not paid any taxes to me on the ground that full tax on the service is being paid by the contractor themself. Accordingly, I have not paid any taxes.

I have been showcaused and have to fight a uncertain battle for the adamant attitude of CCL(Central Coalfields Limited).

 

Best Regards,

 

SL Naik

[Pradeep Khatri]

Dear Sir,

Sub-contractor are not exempted from payment of service tax. 

[sv bhasker]

Sir,

Department can ask sub contractor to pay service tax. It is clarified by the Board in Master circular 96/7/2007 dt 23.8.2007 that sub contractors are required to pay  service tax which becomes input service credit to the main contractor. It means, main contractor can take credit of service tax paid by the sub contractor and discharge their service tax liabilty liabilty. This would avoid double taxation.

[onkar kumar]

Yes, All are saying correct and same thing.