TaxTMI 
TaxTMI 
Payment of service tax - under different category
25 Dec 2007 
2 Replies 
1309 Views Asked by
Works contract composition option must be exercised before any service tax payment; restructuring risks anti avoidance scrutiny.
The composition option under Rule 3(3) must be exercised before any service tax payment on the relevant works contract; once tax has been paid under the normal rate it is difficult to change. "Works contract" refers to the project as a whole rather than an individual contract. Termination and re contracting to access the composition scheme may be possible but risks being treated as a colorable device to evade tax and attracting anti avoidance scrutiny. (AI Summary)
The composition option under Rule 3(3) must be exercised before any service tax payment on the relevant works contract; once tax has been paid under the normal rate it is difficult to change. "Works contract" refers to the project as a whole rather than an individual contract. Termination and re contracting to access the composition scheme may be possible but risks being treated as a colorable device to evade tax and attracting anti avoidance scrutiny. (AI Summary)
If a person who is paying service tax on a Construction of Residential Complex, now he wants to change the option to pay Service Tax under Work Contract on the said project OR this is applicable only on new work contract OR he can terminate the said contract and sign again for balance work and pay service tax under Work Contract Scheme. Deepak Goel Mob No. 9818112228