Servicetax on WCT under Composition Scheme.

[sankunni krishnan]

My client is a works contractor opted for composition scheme paying service tax at 4.12% but Aervice Tax audit officers object to it based on Section 2A(I)(i) & (ii) of Service Valuation Rules 2006.They insist that my clients should have opted for composition under State VAT laws also,then only they are eligible for Service Tax Composition Scheme under Notification No.32/07 ST.Is it correct,give detailed reply.

[Brijesh Verma]

Dear Sankunni Krishnan Ji,

Availabilityof composition scheme to any Work Contractor under the service tax law is available under the provisions of the Work Contract (Composition) Rules of 2007. Under those rules there is absolutely no requirement that only those persons who are registered under composition scheme under the respective VAT law can only opt for the composition scheme under the service tax law. 

Opting of composition scheme under the Service Tax law is absolutely independent of the opting of composition scheme under the VAT law.

AI Summary

Composition scheme for works contractors: service tax eligibility is independent of VAT composition registration, allowing separate opt in. Availability of the composition scheme for works contractors under service tax is governed by the Work Contract (Composition) Rules, 2007 and does not depend on any parallel opt in under state VAT composition schemes; opting for service tax composition is an independent election under service tax law and cannot be denied solely because the contractor has not availed a VAT composition option.