2019 (12) TMI 1549 - AAR - GST

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

In Re: M/s. Vinayaka Constructions,

The Authority for Advance Ruling ruled that the applicant, a works contractor providing road construction services for the Government of Andhra Pradesh, ... Input tax credit - reconstruction of the road work 'Penugonda to Munamarru' in Penugonda Mandal of Achanta Assembly Constituency, West Godavari District - credit of GST paid on goods and services used as inputs in execution of 'Works Contracts' - execution of Road work contracts to Government Engineering Departments - HELD THAT:- The applicant is providing work contract service under Section 2(119) of the CGST Act 2017, for construction of road ''Penugonda to Munamarru' in Penugonda Mandal of Achanta Assembly Constituency, West Godavari District - ITC for works contract can be availed by the applicant as he is in the same line of business and entitled to take ITC on the tax invoice raised by his supplies as his output is works contract services. In the instance case, the applicant is the supplier of works contract services and the goods and services received by him for construction of immovable property (other than Plant or machinery) are neither owned nor capitalized in his own account, but passed on to the contractee. Hence even as per the provision of Section 17(5) (d), the applicant does not fall under this ineligible category. Thus the restriction contained under clause c & d of sub section 17(5) is not applicable to the applicant in the given circumstances. The applicant is eligible for Input Tax Credit (ITC) in respect of the GST paid on goods and services used as inputs in execution of 'Works Contracts'. Input Tax Credit restriction under Section 17(5)(c) and 17(5)(d) will not apply to the applicant as his output is works contracts service. 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.