Works contract (Composition scheme)

[sunil jain]

As per rule 3(3) of Works Contract(Composition Scheme for Payment of service Tax) Rules,2007 dt 22.05.07,the taxable service provider who opts to pay tax as per these rules shall exercise such option prior to payment of s.tax. We need a clrification whether such excersing of option need to be filed with S.Tax Deptt. or simply on self basis without any formal intimation to Deptt.

[Madhukar N Hiregange]

It is an interesting question. Also a possible defense in case of any dispute. Requires further study. The answer to the question that if one were to simply start paying 2% for some contracts then whether the non filing would have any effect. The answer is no, the benefit cannot be denied. The why file? Intention presently appears to be to file the option with department.

[sunil jain]

As there is no requirement in Rules to file such option with the S. Tax Deptt. & all the more form has been prescribed u/r, therfore in my view there is no need to file such option with the Deptt. Once we start paying under Works Contract categogy, this amounts to excersing such option.

AI Summary

Option to pay under composition scheme: starting to pay suffices; no formal filing required though some notify. The document addresses whether the option under rule 3(3) of the Works Contract composition rules must be filed with the service tax department. It reports practitioners' consensus that no formal filing is required: commencing payment at the prescribed composition rate constitutes exercise of the option and entitlement should not be denied for non-filing, while some practitioners nonetheless prefer to notify the department for precautionary documentation.