(1) A dealer executing works contract shall be eligible to pay tax by way of composition in the manner set out in the following sub-rules, in lieu of tax payable under clause (a) of section 9, if-

(a) he has been registered under the repealed Act or under the Act for the whole of the preceding year; and

(b) he has furnished returns for all the tax periods within the due date for the preceding year.

(2) A dealer eligible for payment of tax by way of composition under sub-rule (1) shall make an application in Form VAT-601 exercising option for payment of tax by composition together with the details of works executed, gross value of the works so executed, tax deducted at source and the tax assessed, if any, for the year preceding to the year, in which the application under this sub-rule is made.

(3) An application under sub-rule (2) shall be made along with the particulars as required to be furnished under that sub-rule, by the end of June of the year, for which such application is made.

(4) An option once exercised shall remain valid for a period of three consecutive years unless one or more of the conditions specified in sub-rule (1) is satisfied at any time during the three years referred to above:

Provided that where such condition is not satisfied in course of a year, the facility of payment of tax by way of composition shall be allowed till the end of that year.

(5) A dealer exercising option under sub-rule (2), shall pay tax at the rate of four per cent on sixty per cent of the gross value received or receivable towards execution of works for any year, during which such dealer has been granted permission to pay tax by way of composition, under sub-rule (6).

(6) Upon receipt of an application as referred to in sub-rule(2), the registering authority may, if he is satisfied that the application is correct and complete, the information furnished therewith satisfy the eligibility criteria as specified in sub-rule (1) and, after conducting such enquiry as he deems necessary, grant permission to the dealer for payment of tax by way of composition under sub-rule (5) from such date and in such manner, as may be mentioned in the order in Form VAT-602.

(7) The tax payable by a dealer, who has been granted permission for payment of tax by way of composition under sub-rule (6), shall be deducted at source in accordance with the provisions of rule 58.

(8) The dealer as referred to in sub-rule (7) shall, furnish to the assessing authority, the name and address of the deducting authority in respect of the works being executed by him in Form VAT-603 A and such deducting authority shall be intimated by the assessing authority in Form VAT-603 to deduct tax at source at such rate and on such percentage of the gross value of the works, as specified in sub-rule (5).

(9) Notwithstanding anything contained in sub-rules (1) to (8) and subject to the proviso to sub-rule (4), the assessing authority may, assess the tax payable by a dealer in accordance with the provisions of section 42, for any year for which the dealer has been permitted to pay tax by way of composition in lieu of tax assessable on his taxable turnover, if he is satisfied on the basis of audit that the dealer has suppressed the gross value received or receivable towards execution of works contract during the preceding year.