ITC to Builders

[RAMESH SINGLA]

I have been looking for an answer as to whether section 17(5)(c) bars the credit when works contract service are supplied for construction of an immovable property. The language of the section apparently bars such ITC except when such works contract service is input service for further supply of works contract service. Therefore, it appears that the builders who are building or getting constructed buildings which are obviously, immovable properties, would not be eligible for ITC. I request the experts to read the section and then give the opinion. My view is that the ITC is not admissible to the builders in view of the language used in section 17(5)(c). However, most of the people in trade and also the Revenue officers feel that the ITC is admissible. I admit the policy of the govt. is to allow ITC but i feel the language of the section is not supporting the intention of the govt. The courts interpret on the basis of language used in the provision and not in terms of the policy of the govt. Pl give your views.

AI Summary

Input tax credit for works contract services may be denied where the service is used in constructing immovable property, subject to exception.
Availability of input tax credit depends on whether works contract services used in building an immovable property fall within the statutory exclusion denying credit for services used for construction of immovable property, versus the view that where construction is supplied as a works contract service to a customer (including subcontractor inputs), related input tax credit remains claimable.