Works Contract

PJ/Articles/07-08/13 Date: 12/07/2007

Works Contract

The Finance Bill, 2007 has extended the arms of Service Tax levy on Works Contract which has come into effect from the June 1, 2007. Now the contractors involved in Works Contract will have to pay service tax on transfer of services. The imposition of service tax on Works contract has given rise to many issues which need to be clarified for ease and better assistance to public at large. This Article makes an effort to highlight the essential facts related to the levy.

Outline: -

1. Introduction

2. Meaning of Works Contract

3. Exclusion

4. Analysis of the Definition

5. Relevant Case laws

6. Definition as per various State Laws

7. Value of taxable service

8. Rate of Service Tax

9. Composition Scheme

10. Comparison with other services

11. Applicability on Running Works Contract

12. Conclusion

1. Introduction:-

‘Works Contract’ as we all know and understand, is a composite contract involving transfer of property in goods as well as rendering of some services, in manner that the goods transferred becomes more beneficial and worthwhile for the user as per his requirements.

The Finance Minister with the motto ‘when transfer of property involved in Works Contract is taxable, then why the transfer of Services involved in Works Contract is not taxable’ proposed the levy of service tax on Works Contract vide Finance Bill, 2007. Thereby Section 65 (105) of the Finance Act, 1994 was amended and a new sub-clause (zzzza) was introduced paving way for the levy.

2. Meaning of Works Contract:-

In common parlance, a ‘Works Contract’ is an agreement which is a combination of services or labour and transfer of goods. Under the newly inserted section 65 (105) (zzzza) the term ‘Works Contract’ has been defined. The section reads as follows: -

“Taxable service means a service provided or to be provided:

To any person, by any other person in relation to the execution of a Works Contract, excluding Works Contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.

Explanation: - For the purpose of this sub-clause, ‘Works Contract’ means a contract:

(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii) such contract is for the purposes of carrying out, -

(a) Erection, commissioning or installation, of plant, machinery, equipment or structures, whether pre fabricated or other wise, installation of electrical and electronic devices, plumbing, drain laying or other installation for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

(b) Construction of a new building or a civil structure or a part thereof, or of a pipe line or conduit, primarily for the purpose of commerce or industry, or

(d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or

(e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects.”

Thus, it has two conditions viz. one that such contract should be leviable to Sales Tax. This is very important condition and persons paying the sales tax under works contract can be covered under the same. Secondly, the projects related to installation or commissioning, commercial construction activity and construction of residential premises and EPC projects are taxable to service tax. This implies that all the projects related to works contract are not covered under the service tax. These are already covered under the Service tax under the category of Commercial or industrial construction service, Construction of complex service and Erection, commissioning or installation service.

3. Exclusion:-

Even the works contract which is chargeable to service tax does not attract the following infrastructures related to works contract:

· Roads.

· Airports.

· Railways.

· Transport Terminals.

· Bridges.

· Tunnels.

· Dams.

4. Analysis of the Definition:-

The definition as provided under section 65 (105) (zzzza) is an exhaustive definition which includes certain types of contracts as: -

a. Works Contract for carrying out erection, commissioning or installation.

b. Works Contract for Commercial or industrial construction.

c. Works Contract for construction of complexes.

d. Works Contract for turnkey projects including Engineering procurement and Construction or Commissioning (EPC) projects.

The existing provisions of the section 65 (105) (zzh); 65 (105) (zzq) and 65 (105) (zzd) relating to services like commercial or industrial construction service, construction of complex and erection, commissioning or installation were already taking care of the services covered under Works Contract. A comparative analysis of these definitions with that of works contract reveals as follows:

A) Comparison of services ‘Works Contract’ and ‘Erection, commissioning or installation’: -

Works Contract

Section 65 (105) (zzzza)

Erection, commissioning or installation

Section 65 (39a)

‘Works Contract’ mean a contract:

(iii) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(Iv) such contract is for the purposes of carrying out:-

(a) Erection, commissioning or installation, of plant, machinery, equipment or structures, whether pre fabricated or other wise,

installation of electrical and electronic devices,

plumbing, drain laying or other installation for transport of fluids,

heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work,

thermal insulation, sound insulation, fire proofing or water proofing,

lift and escalator, fire escape staircases or elevators; or

Section (39a) ‘erection, commissioning or installation means any service provided by a commissioning and installation agency in relation to :-

(i) Erection, commissioning or installation, of plant, machinery, equipment or structures, whether pre fabricated or other wise; or

(ii)installation of –

(a)installation of electrical and electronic devices, including wiring or fittings thereof; or

(b) plumbing, drain laying or other installation for transport of fluids,

(d) thermal insulation, sound insulation, fire proofing or water proofing,

(e) lift and escalator, fire escape staircases or elevators; or

(f) Such other similar services.

Thus, it can be concluded that clause (a) of ‘Erection and Commissioning ‘services covers “including wiring or fitting thereof”, but the same is not covered under the Para provided in the definition of Works Contract. Hence, the extract is that any service of pure wiring or fitting will not be covered under Works Contract but will continue to be so under “Erection, commissioning or installation” service. Moreover clause (f) “Such other similar services” of ‘Erection, Commissioning or Installation’ service is also not the part of the definition of Works Contract. Thereby the definition of the Works Contract is narrow in comparison to the service ‘Erection, commissioning or installation’ and covers only specified services.

B) Comparison of services ‘Works Contract’ and ‘Commercial or Industrial Construction Service’

Works Contract

Section 65 (105) (zzzza)

‘Commercial or Industrial Construction Service’

Section 65 (25b)

(b) Construction of a new building or a civil structure or a part thereof, or

of a pipe line or conduit, primarily for the purpose of commerce or industry, or

Note: Clause (c) to be dealt in next comparison

(d) Completion and finishing services,

repair, alteration, renovation or restoration of, or similar services,

in relation to (b) [i.e. clause (b) as mentioned above.]

‘commercial or industrial construction service" means—

(a) construction of a new building or a civil structure or a part thereof; or

(b) construction of pipeline or conduit; or

tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and

railing, construction of swimming pools, acoustic applications or fittings and other similar

services, in relation to building or civil structure; or

(d) repair, alteration, renovation or restoration of, or similar services in relation to, building

or civil structure, pipeline or conduit,

which is—

(i) used, or to be used, primarily for; or

(ii) occupied, or to be occupied, primarily with; or

(iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams;

Thus, we can conclude that the definition adopted by the Government is an extract of the definition of ‘Commercial or Industrial Construction Service’. Moreover the definition of ‘Commercial or Industrial Construction Service’ is exhaustive as it precisely describes what is covered under this category. But the point to be noted here is that the services of Works Contract as mentioned in clause (b) there to must be in relation to commerce and industry.

C) Comparison of services ‘Works Contract’ and ‘Construction of complex’: -

Works Contract

Section 65 (105) (zzzza)

Construction of complex

Section 65 (30a)

(d) Completion and finishing services,

repair, alteration, renovation or restoration of, or similar services, in relation to (c) [i.e. Clause (c) as mentioned above]

“construction of complex" means—

(a) construction of a new residential complex or a part thereof; or

(b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or

complex;

Therefore, we can conclude that all the provisions of the definition of the service ‘Construction of complex’ are covered under the definition of Works Contract. The only difference is that the definition provided in ‘Construction of complex’ service is more exhaustive as it precisely defines what is covered under this category.

Now, as it is seen that the certain services are falling within the purview of more than one service thus this attracts the applicability of section 65A in this respect. In this section, ways of classifying the service falling under two or more categories is given. As per applicability of this section the interpretation comes out to be that a more specific definition should be preferred in lieu of a general definition, thus if any of the service as specified in the definitions discussed above is chargeable to VAT or Sales Tax then provisions of Works Contract will apply. This is because the Works Contract under 65 (105) (zzzza) has been defined as ‘Works Contract’ wherein, transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods. If the service so provided fails to satisfy this condition then the provisions of other clause may apply.

5. Relevant Case Laws:-

Introduction of new service ‘Works Contract’ has arisen the difficulties in judging the nature of contracts that a particular case will fall under Works Contract or it will continue to fall within the purview of previous services. Under this head we are discussing some relevant case laws.

A) K.Raheja Development Corporation Vs. State of Karnataka (2005-TIOL-77-SC-CT). Here the appellant carry on the business of real estate development and allied contracts. The appellant entered into construction agreements with the buyers of the land. The agreement contained a provision that the ownership in the property will be transferred only on the full payment and completion of the contract. The assessing authority contended that as the construction was carried out and payment was received by the relevant buyers in installments. This amounts to construction on the behalf of the respective buyers and will attract the levy under works contract. But the appellant pleaded that ownership was not transferred to the prospective buyers thereby this does not amounts to be a Works Contract. The case was referred to the Apex Court of India. The Supreme Court of India in its verdict held that this activity will fall under Works Contract, as the definition so provided in the Karnataka sales Act, reveals that “Works Contract includes any agreement for carrying out for cash, deferred payment or other valuable consideration ……..” Thereby relying on the definition works contract attracts any agreement and the contract in concern shall also fall within the purview of Works Contract.

B) Assotech Realty Pvt. Ltd. Vs. State of UP and Another [2007-TIOL-297-HC-ALL-CT]: The petitioner is a private company incorporated under the provisions of the Companies Act, 1956. The petitioner is engaged in the business of developing the land purchased from various authorities and constructing houses with intention of selling them for consideration to the interested persons/allottees. The petitioner entered into an agreement with the buyers. In the allotment letter, it has been specifically mentioned that the terms and conditions of allotment are subject to the sale deed to be signed between the parties. Here the petitioner contended that he continued to be the owner of the apartments/flats and constructions thereon till the execution of the registered sale deed. It is the case of the petitioner that it does not undertake to make any construction for and on behalf of the purchasers/allottees and all the constructions made by it are on its own account in accordance with the lay out and sanctioned map approved. But the respondent held that this case was similar to the provisions of the case of K.Raheja Development Corporation Vs. State of Karnataka (2005-TIOL-77-SC-CT) and attracts the levy under Works Contract. The petitioner in response stated that the principle laid down in the aforesaid case is not applicable in this case as he has not undertaken any construction work for and on behalf of the prospective allottees/purchasers and the title in the flats/apartments so constructed passes to the purchasers only upon execution of the sale deed and its registration. Till such time the sale deed is not executed, the right, title and interest including the ownership and possession in the construction so made remains with the petitioner. Thus seeking the facts presented by the petitioner Allahabad High Court held that this does not attracts Works Contract levy as own construction is not Works Contract.

Similarly, it’s true that any contract will fall under Works Contract or not can be determined only in reference to the definition provided in the respective state Sales Tax Act and the terms and conditions of the agreement/contract so entered into. Thus the entire thing depends upon the definition so provided in the respective state Sales Tax Acts.

6. Definition as per various State Laws:-

Section 65 (105) (zzzza) defines the ‘Works Contract’ as

“a contract wherein: -

(i) transfer of property in goods involved in the execution of such contracts is leviable to tax as sale of goods and….”

The statement “leviable to tax as sale of goods” have its own importance. As said earlier, the service tax on works contract will be leviable only in those cases where the VAT is leviable. As we all know that each State Government has adopted VAT laws as per their requirements and suitability. There exists a great variance in the definitions existing in different states laws. Hereunder given are few definitions of Works Contract under some of the State laws: -

(i) Gujarat VAT Act:

Section 2(23) “sale” means a sale of goods made within the state for cash or deferred payment or other valuable consideration includes -

(b) transfer of property in goods (whether as goods or in some other form) involved in execution of Works Contract.

Explanation (ii): - for the purpose of sub-clause (b) of the expression ‘Works Contract’ means a contract for execution of works and includes such Works Contract as the State Government may, by notification in the Official Gazette, specify;

(ii) Delhi VAT Act:

Section 2(zo) ‘Works Contract’ includes any agreement for carrying out for cash or for deferred payment or for valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property;

(iii) Karnataka VAT Act:

Section 2(37) ‘Works Contract’ includes any agreement for carrying out for cash, deferred payment or for other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property;

(iv) Andhra Pradesh VAT Act:

Section 2(45) ‘Works Contract’ includes any agreement for carrying out for cash or for deferred payment or for any other valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, laying, fitting out, improvement, modification, repair or commissioning of any movable or immovable property;

(v) Haryana VAT Act:

Section 2(zt) ‘Works Contract’ includes any agreement for carrying out for cash, deferred payment or for other valuable consideration, the assembling, the construction, building, altering, manufacturing, processing, fabrication, installation, fitting out, improvement, repair or commissioning of any movable or immovable property

(vi) Rajasthan VAT Act:

Section 2(35) “sale” means every transfer of property in goods by one person to another for cash, deferred payment or other valuable consideration and includes –

(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a Works Contract;

Explanation: - For the purpose of this ‘Works Contract’ means a contract for work and labour or services involving transfer of property in goods (whether as goods or in some other form) in its execution.

Hence, as it is seen from above, there are variations in the definition of Works Contract in each case. Looking to the provisions it appears that for the purpose of Works Contract under service tax provisions of the respective state laws will have to be kept in mind.

7. Value of taxable service in relation to Works Contract:-

As per section 67, value of a taxable service shall be the gross amount charged in respect thereof. Works Contract being of a complex nature, special provisions for its valuation has been introduced. Service Tax (Determination of Value) Rules, 2006 has been amended [vide Notification No. 29/2007-ST, Dated: 22/05/2007] inserting a new Rule 2A, providing the value in relation to Works Contract Service.

As per new Rule 2A, value of Works Contract service shall be equal to: -

Gross amount charged for the works contract (excluding VAT or Sales Tax, if any, paid on transfer of property in the goods involved in the contract)

___

Value of Transfer of property in the goods involved in the execution of the contract

Here the value for Works Contract shall include: –

(i) Labour Charges

(ii) Payment to sub-contractor for labour and service

(iii) Planning, designing and architect charges

(iv) Charges for hiring machinery, tools etc.

(v) Cost of consumables, like water, electricity, fuel etc.

(vi) Establishment cost of the contractor

(vii) Similar expenses for supply of labour and services

(viii) Profit earned relatable to supply of labour and services.

The point to be noted here is that if VAT or Sales Tax has been paid on the actual value of the sale of goods, then such value adopted for VAT shall be taken as the value for service tax also.

8. Rate of Service Tax:-

Service tax in relation to Works Contract service shall be leviable at the rate of 12.36% (including Education Cess and Higher & Secondary Education Cess) on the value of such taxable service. The alternative option is also available to the assessee in this respect where he can opt for the composition scheme and pay an amount equivalent to 2.06% (including Education Cess and Higher & Secondary Education Cess) of the gross amount charged for the Works Contract (excluding VAT/Sales tax paid on the transfer of property in goods involved in the execution of the contract).

9. Composition Scheme:-

Keeping in mind the complexities involved in the Works Contract service, a simplified composition scheme has been announced for such service providers. The scheme is similar to the schemes going on under different VAT laws. Works Contract (Composition Scheme for payment of service tax) Rules, 2007 have been framed for this purpose [vide Notification No.32/2007-ST, Dated 22/05/2007]. The salient features of this scheme are as under: -

(a) Scheme is optional: -

This scheme is purely optional, a service provider can opt for the scheme and alternatively not as per his discretion. But this do not means that he can apply his will as and when he requires. There is a restriction to this. The option so exercised must be before the payment of service tax in respect of the said works contract. Once the option is exercised it can not be withdrawn until the completion of the said contract.

(b) Rate of tax: -

The service tax payable under this scheme is 2.06%. [Discussed above under the heading Rate of service tax].

(C) Conditions: -

There are certain conditions that are to be fulfilled to enjoy the benefits of the composition scheme. The conditions are: -

Þ The service provider shall not avail CENVAT credit of duties or Cess paid on any inputs, used in or in relation to the said Works Contract.

Þ CENVAT credit can be availed in respect of service tax (and Cess) paid on any input service outsourced/sub-contracted by the contractor rendering the work contract service.

Þ CENVAT credit of service tax paid on Works Contract can be availed by the contractees.

10. Comparison with other services:-

As discussed above under the heading “Analysis of definition”, we have tried to reveal the differences in the definitions of the new levy and existing correlative previous levies. Now under this head we would like to introduce you towards the comparative analysis of the various other provisions like abatement, rate of levy and Cenvat Credit among these services.

(i) Abatement:-

Abatement is allowed in the cases if the assessee pays the tax on the composite value of the contract which includes in it the value of the material and goods sold. The abatement rate is same in the previous existing services but this is not the case when we talk about the Works Contract service. Under this service no direct abatement is allowed but the rate applicable in such circumstances have been fixed.

(ii) Rate of levy: -

The rate of levy given below includes Education Cess and Secondary and Higher Education Cess.

The abatement percentage and rate of levy is summarized in the table produced below:-

Particulars

Works Contract

Section 65 (105) (zzzza)

‘Commercial or Industrial Construction Service’

Section 65 (25b)

Erection, commissioning or installation

Section 65 (39a)

Construction of complex

Section 65 (30a)

Abatement

No direct abatement

67% abatement

Rate of levy

2.06 % on the gross amount charged for the contract (including the value of material and goods sold)

4.08 % on the Gross amount charged for the contract. (This is after 67% abatement).

Abatement

No direct abatement

NIL

Rate of Levy

12.36 % on the value of such taxable service.

12.36 % on the value of such taxable service (i.e. excluding the value of goods and material sold by the service provider).

Hence, we can construe that the previously existing provision of rate of service tax on the value of taxable service remains same for all the services this was being done when the assessee avails the benefit of Notification No. 12/2003-ST, dated: 20/06/2003. But if the assessee does not avails the benefit of the aforesaid Notification then he was being allowed an abatement of 67% under previously existing services, on the gross value charged for the contract. This is not the case in the Works Contract service. Under this category of service no abatement is prescribed directly. Instead an indirect method has been adopted by the Government; whereby a fixed rate of 2.06% has been prescribed which is to be levied on the gross amount of the contract including the value of the material and goods sold under the contract.

(iii) CENVAT Credit: -

Works Contract

Section 65 (105) (zzzza)

‘Commercial or Industrial Construction Service’

Section 65 (25b)

Erection, commissioning or installation

Section 65 (39a)

Construction of complex

Section 65 (30a)

(i) Cenvat Credit is allowed on all the input service; inputs and capital goods if the assessee does not avail the benefit of the Notification No.12/2003-ST.

(ii) If the assessee pays levy under composition scheme then, Cenvat Credit is not allowed on inputs used in or in relation to the contract. But the Cenvat credit of the input services and capital goods can be availed.

(i) Cenvat Credit is allowed on all the input service; inputs and capital goods if the assessee does not avail the benefit of the Notification No.12/2003-ST.

(ii) If the assessee pays the tax on the composite value then Cenvat credit can not be availed in any respect.

(i) Cenvat Credit is allowed on all the input service; inputs and capital goods if the assessee does not avail the benefit of the Notification No.12/2003-ST.

(ii) If the assessee pays the tax on the composite value then Cenvat credit can not be availed in any respect.

(i) Cenvat Credit is allowed on all the input service; inputs and capital goods if the assessee does not avail the benefit of the Notification No.12/2003-ST.

(ii) If the assessee pays the tax on the composite value then Cenvat credit can not be availed in any respect.

If the assessee pays service tax on the value of the services rendered then he can avail the benefit of Cenvat Credit on all inputs; capital goods and input services under all the four categories. But if he opts to pay the tax on the composite value then he is not allowed to take Cenvat Credit under the existing services. This is not the same in the new service. In the Works Contract service the assessee enjoying the benefit of the composite scheme is allowed to take credit on the capital goods and input services used in or in relation to the contract.

In the nut shell we can precisely go through the differences as under: à

Composition scheme	Services Provisions	Works Contract Section 65 (105) (zzzza)	‘Commercial or Industrial Construction Service’ Section 65 (25b)	Erection, commissioning or installation Section 65 (39a)	Construction of complex Section 65 (30a)
No	Rate	12.36%	12.36%	12.36%	12.36%
	Abatement	No	No	No	No
	Cenvat Cr.	All	All	All	All
Yes	Rate	2.06%	4.08%	4.08%	4.08%
	Abatement	No	67%	67%	67%
	Cenvat Cr.	Yes (excluding that of inputs)	No	No	No

Thus, this can be truly said that it is really bonanza for the construction and erection and commissioning industry. The duty liability of the industry is halved along with the Cenvat facility of input services. It is really beneficial when there are sub-contractors in a particular project. The sub-contractor is also liable to pay service tax. The service tax paid by the sub-contractor was not allowed as credit when the abatement is claimed. Thus, this service tax was added to the cost. But when the service tax is paid under works contract then the tax paid by sub-contractor is allowed as credit. Thus, the overall liability is reduced to a great extent. This will be clear from following table:-

Service	Gross Liability		Total Liability
Service	Sub-contractor	Main-contractor	Total Liability
Commercial or industrial construction service [Section 65 (25b)]	4.08%	4.08%	8.16%
Erection, commissioning or installation service [Section 65 (39a)]	4.08%	4.08%	8.16%
Construction of Complex service [Section 65 (30a)]	4.08%	4.08%	8.16%
Works Contract [Section 65 (105) (zzzza)] a) If subcontractor also falls under the works contract b) If subcontractor does not falls under the works contract	2.06% 4.08%	2.06% 2.06%	* 2.06% * 2.06%

* as the Service Tax paid by the sub-contractor will allowed as Cenvat Credit

11. Various Exemptions:-

Notification No. 25/2007-ST, Dated 22/05/2007 provides full exemption to services provided in relation to the execution of Works Contract in relation to construction of ports or other port. However this exemption is not allowed in respect of services of completion and finishing, repair, alteration, renovation, restoration, maintenance or repair provided in relation to existing port or other port.

However, a General exemption is available for small service providers having taxable value of service up to Rs. 8 Lakhs, provided that the aggregate value of taxable service during the preceding year shall not exceed Rs. 8 Lakh.

12. Applicability on Running Works Contract:-

There is a big dispute in the starting of this levy. The TRU Clarification as well as on the basis of section 65A of the Finance Act, 1994 the ongoing contracts, which are hitherto classified under different service, will get classified only under Works Contract service, with effect from 1^st June, 2007. Once the classification is decided, the next question that arises is whether such contracts will enjoy the option of switching over to composition scheme for the on going contracts or not. There is ambiguity in reply to this question because the option is to be exercised in the starting of the project. But the service is already being provided. But due to reduced duty liability, everyone intends to opt for the same. The answer to this question is that he has the option of switching over to composition scheme. The reason is that as the Works Contract services which were being classified under different services prior to 1/6/2007 will now fall under ‘works contract service’ w.e.f. 1/6/2007. Thus, this connotes that the on going contracts were not works contract prior to the said period and will become Works Contract after 1/6/2007. Thus such service providers are yet to pay any service under works contract and thereby he is at liberty to choose the composition scheme.

Moreover, since the levy on Works Contract has been introduced w.e.f. 1/6/2007, the contract was even otherwise a Works Contract as per the VAT / Sales Tax provisions, this fact is not at all of any relevance to determine the applicability of service tax. For the purpose of levy of service tax the contract is a Works Contract only from 01/06/2007 and this fact is alone relevant to determine any connected issue.

13. Conclusion:-

Works Contract is already taxed (on the goods portion) under VAT /Sales tax laws. Now service tax is being levied on the service part of such contracts. This can be called as a bonanza to the industry. As these services earlier also were taxed under different service heads it does not matter whether they have to change their service category. But the provisions of the new service so introduced by the Finance Bill, 2007 is more beneficial for the service providers. Under this category they can opt to pay 2.06% tax on the composite value of the service instead of paying 4.08% as provided in the previous services. Moreover they can avail the facility of CENVAT Credit on the value of capital goods and input services. Hence, it is a real bonanza to the industry as a whole.

By: Pradeep Jain (FCA)

Preeti Parihar (ACA)

Siddharth Rutiya

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Arvind Kaushik on 21 June, 2013 wrote:

Above information is correct but very old .Now many modification in WCT. Plz updated WCT download on site.

Rakesh Chitkara on 05 July, 2009 wrote:

Have visited the site for the first time. Commendable effort. May I suggest that archives be turned contemporary. This is an excellent article. Definitely, you can now revise it and update it. Not only for this, other important articles can be similarly updated, by including latest developments, including important case-laws.

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