10.1 A new sub-rule (2A) is being added in rule 3 in the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 vide Notification 1/2011-ST so as to restrict the Cenvat credit to 40% of the tax paid on services relating to erection, commissioning & installation; commercial or industrial construction and construction of residential complex, in case tax has been paid on full value of the service after availing Cenvat credit on inputs i.e. without availing exemption notification 1/2006-ST dated 01.03.2006. This has been done to ensure that the credit on inputs is not availed of indirectly while availing of the composition scheme.  

Restriction on Cenvat credit: curbs input credit when composition scheme tax is paid on construction related services. A new sub rule (2A) in rule 3 of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 (Notification 1/2011 ST) restricts Cenvat credit where tax is paid on the full value of erection, commissioning and installation services, commercial or industrial construction, and residential complex construction after inputs have already been credited and the exemption under Notification 1/2006 ST was not availed, to prevent indirect benefit of input credit with the composition scheme.