Works Contract- Composition - Rules
The Government has notified the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 effective from 1st June, 2007
The person liable to pay Service Tax in relation to works contract shall have the option to discharge his service tax liability on the works contract service by paying an amount equivalent to two per cent of the gross amount charged for the works contract instead of paying service tax at the rate specified in section 66 of the Act.
The gross amount will not include VAT or Sales Tax paid.
The Service provider who pays the Service Tax @ 2% will not be eligible for cenvat credit. He should exercise his option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works.
Notification No. , Dated May 22, 2007