Meaning of the expression ‘gross amount’ appearing in Rule 3(1) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, as it stood prior to 07th day of July 2009 – regarding. - Service Tax - 05/ST/2012

OFFICE OF THE COMMISSIONER OF SERVICE TAX 17-B, IAEA House, Indraprastha Estate, NEW DELHI 110002 Trade Notice No. 05/ST/2012 Dated 16/04/2012 Subject:- Meaning of the expression gross amount appearing in Rule 3(1) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 , as it stood prior to 07 th day of July 2009 regarding. The issue as regards whether gross amount for purpose of payment of service tax under Works Contract Composition Scheme, included the value of free of cost supplies, for the period prior to 07/07/2009, has been examined. 2. The meaning of the expression gross amount appearing in Rule 3(1) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 , is qualified by the Explanation inserted in Rule 3(1) with effect from 07/07/2009. Since the Explanation inserted in Rule 3(1) with effect from 07/07/2009 is clarificatory and prospective in nature, inclusion of value of free-of-cost supplies of goods and services in or in relation to the execution of Works Contract [mentioned in the Explanation to Rule 3(1) (a) (i) and (ii) ] in the gross amount for the purpose of payment of service tax on works contract under composition scheme, is a legal requirement, only with effect from 07/07/2009 when the Explanation became a part of rule 3(1). 3. The explanation appended to Rule 3(1) with effect from 07/07/2009, categorically says in the proviso that ....nothing contained in this Explanation shall apply to a works contract where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before the 7 th day of July, 2009. Where execution of works contract has commenced prior to 07/07/2009 or where any payment (except payment through credit or debit) has been made towards a works contract prior to 07/07/2009, then in such cases gross amount for the purpose of payment of Service Tax would not include the value of free of cost supplies. It is hoped that this clarifies the statutory position. The trade associations are requested to give wide publicity to the contents of this Trade Notice amongst their member Constitutes. GAUTAM BHATTACHARYA COMMISSIONER (SERVICE TAX) C.NO. IV(16)Hq/Trade Notice/Tech/ ST/2012