Rate applicability in composite scheme

[Anup Kumar Grover]

A company is engaged in the construction of residential building (consisting 4 flats), carried on as construction contract including materials, what is rate of tax in normal and under composition scheme, if possible prescribe the required procedure

[Surender Gupta]

If you are talking about service tax, the rate of service tax is 10% in normal course if you opt for deduction of material value from the gross amount. If your opt for composition scheme the rate of tax is 4%. For new contracts, to avail composition scheme you need to include the value of free material used in the civil work.

AI Summary

Service tax on composite construction: deduct material value or opt composition scheme to determine taxable contract value. Service tax treatment for construction contracts combining materials and services depends on the chosen method: if the supplier deducts material value from the gross contract price, service tax applies to the net service portion; under the composition scheme a flat composite rate applies and new contracts must include the value of free materials used in civil work when calculating the composite levy.