Lump sum scheme for payment of service tax in works contract introduced

0 comments Tuesday, March 20, 2012
In works contract service lump sum scheme for payment of service tax in a works contract has been introduced by amendment in Rule 2A of the  Service Tax (Determination of Value) Rules, 2006 vide Notification No. 11/2012 - Service Tax dated 17-03-2012. In works contract service there were two types of schemes which were earlier available i.e payment of service tax on actual service involved and the composite scheme.

In the composite scheme service tax @ 4.8% is required to be paid on the total value of the whole contract including material part, while in the other case service tax is required to be paid on the actual value of labour and services incorporated in works contract(which can be possible where proper books of accounts are being maintained).
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Rate of tax in composite scheme under works contract service enhanced to 4.8%

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Rate of tax in composite scheme in Works contract service has been changed w.e.f 01-04-2012. The earlier rate of tax in the composite scheme was 4% which now has been enhanced to 4.8%.

Rule 3 of  the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, has been suitably amended whereby  for the words ―four per cent, the figures and words ―4.8 per cent has been substituted.
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Reverse Charge Mechanism in service tax-more clarifications in works contract service required

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 In the Budget-2012-13 under the new Reverse Charge Mechanism in certain services the receipient of the service has been made liable to pay tax instead of service provider. In three of services namely  hiring of means of transport, construction and man power supply both service receiver and service providers have been made liable to tax in the prescribed percentages.

Section 68(2) of the Finance Act, 1994 has been suitably amended in the budget of 2012-13 whereby a proviso has been added to the said section authorising Central Government to notify the service and extent of service tax payable by such person and extent of service tax payable by service receiver.
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