Service tax in relation to execution of works contract services was levied w.e.f. 01-06-2007 [ Please Refer : Section 65(105)(zzzza), Finance Act, 1994. ] 

At Present : Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 provides option to pay service tax @ 4%(earlier 2%) of the gross amount charged for the works contract. However, the service provider opting for composition scheme for payment of service tax should exercise the option prior to payment of service tax. [ Please Refer :Service Tax Notification : No. 32/2007. ] 

Earlier Provision : Prior to 01.06.07, service provider classified the taxable service under erection, commissioning or installation service [Section 65(105)(zzd)], commercial or industrial construction service [Section 65(105)(zzq)] or construction of complex service [Section 65(105)(zzzh)], as the case may be, and paid service tax accordingly. 

Composition Scheme can not be availed : Classification of a taxable service is determined on the basis of nature of service provided whereas liability to pay service tax is related to receipt of consideration. Service provider who paid service tax prior to 01.06.07 for the taxable services like, erection, commissioning or installation service, commercial or industrial construction service or construction of complex service, is not entitled to avail the Composition Scheme.