Para 3 - Composite Service Tax

Composition scheme for works contract service permits payment of a fixed composition amount instead of the standard service tax rate.

A Composition Scheme allows a works contract service provider to discharge service tax liability by paying a fixed composition amount on the gross amount charged instead of the standard rate; the option must be exercised before any service tax payment, applies to the entire contract until completion, and is permissible only where the declared contract value is not less than the gross amount charged. Gross amount charged includes values of goods and services used for execution but excludes VAT/sales tax on transfer of property and certain machinery costs. Providers who opt under the scheme cannot claim CENVAT credit on inputs used in relation to the works contract, and limits apply to CENVAT credit on specific taxable services.