The dealers who are registered and liable to pay tax under TNVAT can opt to pay tax at compounded rate of tax. As per the TNVAT Act, the dealers who make second and subsequent sale in the State can pay tax at the rate not exceeding 1% as notified by the government from time to time (at present the rate is 0.5%). This compound rate is applicable to those dealers whose total turnover for a year is less than Rs.50 Lakhs. Works Contractors: The dealers who deal in works contracts may by option, pay tax at compounded rate on the total value of the works contract executed by them. This is not applicable to the dealers who purchases goods from outside the state or imports goods from outside the country. The tax rates for payment of tax at compounded rate for works contracts as follows: Civil Works Contract: 2% of the total contract value Civil Maintenance Works Contract: 2% of the total contract value of the maintenance work All other works contracts: 5% of the total contract value The dealers in works contract may apply to the assessing authority for payment of tax at compounded rate. The application should accompany with the first monthly return for the financial year or in the first monthly return after the commencement of the works contract. The payment of tax can be made in monthly installments during the year. If a dealer opts to pay tax at compounded rate in any financial year, the decision is final and he cannot change the option in that financial year. The dealers should file the prescribed return. They should not collect any amount by way of tax and they are not entitled to input tax credit on the goods purchased by them. They are not required to maintain books of accounts except the records of works contract and payments received or receivable. Hotels, Restaurants, Sweet-Stalls and Bakeries: The dealers in hotels, restaurants, sweet-stalls and bakeries can pay tax at compounded rate (at present the compounded rate of tax is 2%). This rate of tax is applicable to those dealers whose total turnover is not less than Rs.10 Lakhs but not more than Rs.50 Lakhs for a year. The rate of tax is applicable only to the sale of ready to eat unbranded foods including sweets, savouries, non-alcoholic drinks and beverages, unbranded bakery items served or catered either indoors or outdoors. For computing total turnover, the purchase turnover liable to tax under section 12, will be added to the sales turnover. The dealers should apply to the assessing authority on or before 30th April of the year or within 30 days of commencement of business. The payment of tax can be made in advance monthly installments during the year. The dealers should not collect tax. They cannot take input tax credit. They should file the returns as prescribed. The option for payment of tax at compounded rate will be final for the year and cannot be changed. The dealers can continue to pay tax at compounded rate for the subsequent years or until he withdraws the option in writing. They need to maintain only purchase and sales books of accounts.