service tax at 2%

This query is : Resolved

Basavaraj Baseganni (Querist)
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17 May 2008 hi,

we the contractors for telecom cabling using trenchless technology. Since from 4 to 5 years, we have been raising invoice with full rate of service tax. Now we got the work order with 2% service tax. Please let us know will it be ok if we charge service tax at 2% only based on the work order we got for doing work.

i want to know the legal aspects

Thanks

CA. Subodh Kumar 9864367665

CA. Subodh Kumar 9864367665 (Expert)
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19 May 2008
Foe work Contract service- every contract is independent contract, so we are free to opt or not on any contract for composition.

But the rate hs been increased from 1.3.2008- 4% so also consider this factor.

FOr lehal aspect we wre reproduicng the extract from act.----

3. (1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to two per cent. of the gross amount charged for the works contract.
Explanation.- For the purposes of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract.
(2) The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004.
(3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract.

Basavaraj Baseganni

Basavaraj Baseganni (Querist)
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21 May 2008 subodh,

thanks for the information. But apart from this contract, we are raising invoice at the rate of 12.36%. how do we opt such option for single contract. Please let us know.

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CA. Subodh Kumar 9864367665

CA. Subodh Kumar 9864367665 (Expert)
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21 May 2008 there is no such declaration for using this option, but it is totally based on each contract separately. Mind the contract shud be separtae one from charging contract @12.36%. It means for each and evry contract, u can charge 4%(1.3.2008),before that 2% or 12.36%.