Service Tax- Works Contract - composition - ongoing project - not eligible?
Immediately after the scheme was introduced, we carried an article in June 2007, Service Tax on Works Contract - A storm in the (S)T cup! wherein the author, G Natarajan emphatically stated that ongoing projects would be eligible for the composition asserting that,
"the payment of service tax on the said activity, prior to 01.06.2007, under a different category of service is not at all relevant to opt for the composition scheme under Works Contract Service."
Recently, the Chennai Service Tax Joint Commissioner informed an assessee in a written communication that "it is clarified that the benefit is not available for ongoing projects and the option can be exercised for new contracts/projects only". The JC does not explain, why it cannot be allowed.
Today we bring you another article on the subject by S Sivakumar on the subject.
S. Jai Kumar, an expert on the subject commented,
Say, you are classifying your product under a residual heading as 'others' in the central excise tariff under six digits. Subsequently the eight digit tariff comes and your product finds a specific entry in the eight digit tariff. Will you not classify your product under that specific heading thereafter? In other words, every time you pay tax, be it excise duty or service tax, you are supposed to classify your product/service, which in normal course is deemed to have been done. Going by this, for the services rendered by you after 1/6/2007, when you classify your service, WCis the most appropriate one and as per sec 65A of the FA, you have to classify it accordingly. The string attached by way of the composition rules that you should exercise your option is only for compositionscheme which is a subset under the WC. In other words, there cannot be adisputeabout the classification under WC wef 1/6/07. If at all there is a dispute it can only be about theoption of composition under the WC levy. Now coming to the option, once you are under WC levy wef 1/6/07, then the relevant date for exercising the option could only be 1/6/07 and not before because before 1/6/07, there was no WC and an option couldnever be exercised under WC.
Before parting,
On the contrary, iftheWC levy had come with a higher rate than the construction/eci, tell me, whether the department is going to allow me to continue my construction/eciservices under the old head or insist that I reclassify my services under WC???
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