Service tax composite rate 4.944% (whether available or not)

To treat a contract as ‘works contract’ under service tax, there should be transfer of property in goods involved in the execution of such contract which is leviable to tax as sale of goods under State VAT/Sales Tax law.  If the contract is covered under the definition of original works then abatement at the rate of 60% will be avaialable and the effective service tax rate would be 4.944%.. The composition scheme of works contract is no longer available.

Original works includes all new construction. It appears that water proofing may ormay not fall. Preferable to pay on 60% as other finsihing works.

Agree with Mr. Madhukar Sir. There is an ambiguity as to whether the said service falls under original works. Perhaps more details about the nature of service could help clear the air.

In case it falls under the definition of original works, then service portion would be 40% of the total amount charged, in accordance with Rule 2A. On this portion you have to levy 12.36%. This is similar to applying 4.944% on the total amount charged. This is because 12.36 * 40% = 4.944%

In case the same does not fall within the nature of original works, the service portion would be 60% on which 12.36% S.T. should be levied.

Please correct me if wrong.

Regards,

Vaishak Muralidharan