Rate of Service Tax under composite scheme

[PAWAN KUMAR SHARMA]

There is some confusion that what rate is applicable under Composite scheme e.g. In case of Painting Jobs vendor is charging the rates of service tax @ 3.433 % (which is 1/3rd of the effective rates of tax i.e. 10%) But another vendor is charging the tax on the same Job @ 4.12& Now want to know the service tax rates on the composit scheme in which material + labour both components are there.

[Brijesh Verma]

Rate of tax is 4% + Applicable Cess which makes it to 4.12%. However, recent circulars have clarified that in case of contracts entered into prior to 1-6-2007, where tax has already been paid under any existing category, then the same rate would continue to apply in those cases. Your other contractors might be using those rates. 

AI Summary

Service tax rate under composite scheme clarified; standard rate applies but pre-existing contracts retain prior rates. Clarification: under the composite scheme for material-plus-labour contracts the applicable service tax is the standard rate of 4% plus applicable cess; circulars provide that contracts entered into before 1-6-2007 where tax was already paid under an earlier category continue to be taxed at the pre-existing rate, which may explain differing vendor charges.