Works contractor eligible for Input Tax Credit on GST paid for road construction services

The Authority for Advance Ruling ruled that the applicant, a works contractor providing road construction services for the Government of Andhra Pradesh, was eligible for Input Tax Credit (ITC) on GST paid for goods and services used in works contracts. The restrictions under Sections 17(5)(c) and 17(5)(d) of the CGST Act did not apply as the applicant's output was works contract services, enabling them to claim ITC on all eligible goods and services utilized in the works.

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Issues involved:
1. Eligibility of Input Tax Credit (ITC) for goods and services used in works contracts.
2. Applicability of Section 17(5)(c) and 17(5)(d) of the CGST Act in restricting ITC.

Eligibility of Input Tax Credit (ITC) for works contracts:
The case involved an application filed by a works contractor, seeking clarification on the eligibility of ITC for GST paid on goods and services used in executing road work contracts for the Government of Andhra Pradesh. The applicant argued that they should be entitled to ITC on all goods and services utilized in the works based on the exclusion clause under Section 17(5)(c) of the CGST Act, which allows ITC when input services/goods are used for further supply of works contract services. The applicant contended that since they were executing works for the State of AP and not for themselves, the provisions of Section 17(5)(d) did not apply, which restricts ITC for construction of immovable property on the taxable person's own account.

Applicability of Section 17(5)(c) and 17(5)(d) of the CGST Act:
The Authority for Advance Ruling analyzed the issues raised by the applicant regarding the eligibility of ITC for the works contracts under the provisions of the GST Acts. The Authority found that the applicant was indeed providing work contract services for the construction of roads and clarified whether the restrictions under Section 17(5)(c) and 17(5)(d) of the CGST Act applied to limit the ITC claim. Section 17(5)(c) restricts ITC for works contract services supplied for the construction of immovable property, except when it is an input service for further works contract services. The Authority ruled that the applicant, being in the same line of business, was entitled to claim ITC on the tax invoices raised by their suppliers as their output was works contract services. Additionally, Section 17(5)(d) was examined, which restricts ITC for goods or services received for construction of immovable property on the taxable person's own account. The Authority determined that the applicant did not fall under this ineligible category as the goods and services were not owned or capitalized in their account but passed on to the contractee, thus making the restrictions under Section 17(5)(c) and 17(5)(d) inapplicable to the applicant.

In conclusion, the Authority ruled that the applicant was eligible for Input Tax Credit (ITC) on the GST paid for goods and services used in the execution of works contracts. The restrictions under Section 17(5)(c) and 17(5)(d) of the CGST Act did not apply to the applicant as their output was works contract services, allowing them to claim ITC on all eligible goods and services utilized in the works.

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