Input tax credit on work

[Ajay Sahi]

Sir

Can contractors claim input tax on materials purchased for contruction of govt building?

[Alkesh Jani]

Sir,

As per section 17(5) (c) of the CGST Act, 2017, input tax credit shall not be available in respect of the works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service.

In my point of view ITC is not available, whether it is a Govt. Building or other immovable property.

Thanks

[KASTURI SETHI]

ITC is not available.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Alkesh.

[Himansu Sekhar]

I differ with the views of the Experts

1. There is no bar for taking credit on the goods while providing the WCS.

2. The WCS received is not eligible for credit

3. Even under Sec 68, , of FA 1994, there was no bar of taking the credit on the inputs if no abatement was preferred.

[Himansu Sekhar]

a correction at point no. 2

received by the service recepinet if he not the main contractor

[Ganeshan Kalyani]

With due respect to experts, my view is that for a contractor it is an input service to provide works contract service so input tax credit is eligible.

[KASTURI SETHI]

.............. if contractor receives from sub-contractor. No other way out to avail ITC on material.

[Himansu Sekhar]

Sir, kindly go through the minutes of 20th gst council meeting. Credit on materials is clarified there. In my view, there is no ground for denying the credit. Sec 17 has not put any bar also.

[Alkesh Jani]

Sir,

I am thankful to our experts for expressing their valuable views. In this regards, I wish to add that here as per the query raised, the querist seems to be main contractor, further, the opening lines of Section 17 (5) clearly mentions “input tax credit shall not be available” the definition of “Input tax” is given at Section 2 (62) of CGST Act, 2017, which implies of goods and services and closing lines states that “except where it is an input service for further supply of works contract service”. Therefore, as the querist not providing further supply, ITC is not available. As we know that ITC taken (although not utilized) will lead to litigation matters in future. I am also of the view that any decision of council or circular or any notification, shall not have over-riding effect over the law.

In view of above, I stand still to the views expressed earlier.

Thanks

[Himansu Sekhar]

With humility I welcome the enriching discussions by the experts albeit have a different vide on the following grounds;

Clause (c) of Sub sec. 5 of Sec 17 prohibits the works contract services to the recepient when such services are used for construction of immovable property except plant and machineries.\

Such exception is not applicable to the Service provider because the materials are used for providing the services. The gross value attracts the GST.

[Ajay Sahi]

Thanks to all for valuable input. Still as a contractor supplying the works contract service for contruction of govt building even if its immovable, ITC on purchases of materials to be utilized for the contruction can be availed as its for the furtherance of the business...

[MUKUND THAKKAR]

ITC available in case of WCT is case of immovable property as per definition of works contract.2(119).

(iv) Works contract services when supplied for construction of immovable property, other
than plant and machinery, except where it is for further supply of works contract service;

It is important to note that credit of GST paid on works contract services will be allowed only if
the output is also works contract services.

[Ganeshan Kalyani]

Here, the querist is a receipt of construction service or he himself providing the construction service is not clear. If he is recipient then obviously credit is not allowed. And if he is providing the service then also it is obvious that credit is allowed.

AI Summary

Input tax credit on works contract: availability disputed for immovable property construction; eligibility depends on further-supply input-service. Availability of input tax credit on materials used in works contract services for construction of immovable property is disputed: the statute excludes ITC for such works contract services except where the inward supply is an input service for further supply of works contract service; views diverge on whether contractors (as suppliers) may claim credit on materials while recipients cannot, and commentators note reliance on council guidance and risk of future litigation if credit is taken contrary to the statutory restriction.