GST on construction of road services provided to Govt.

[SHARAD ANADA]

Can a main contractor avail ITC on cement and other materials and capital goods used for construction of road , Dam, etc services provided to Govt. Or it's a block credit U/s 17(5)(c) of CGST Act 2017.

Can sub contractor avail ITC on cement and other materials and capital goods used for construction of Road, Dam etc services provided to main contractor who in turn provide services to Govt. Or it's blocked credit u/s 17(5)(c) of cgst act 2017

Can main contractor avail ITC on bills raised by sub contractor?

Same issue regarding commercial construction or residential construction to private builder?

[Pavan Mahulkar]

Input Tax Credit is blocked as per section 17(5)(c)

(c) 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; &

As per section 17(5)(d)

(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Further explanation is provided

Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs,
to the extent of capitalisation, to the said immovable property; So,

Principal Contractor can avail credit in terms of Works contact services availed from subcontractor as it is used for further supply of works contract service and not blocked u/s 17(5)(c)

Principal Contractor or Subcontractor never used goods or services or both on own account Rather they use the same for transferring to employer/Principal contractor Hence ITC not blocked u/s 17(5)(d)

So in all the scenario mentioned by you either the WC services are provided to Government or for commercial or resedential construction ITC is available unless the said supply is exempted

[Pavan Mahulkar]

Further Principal contractor or subcSubcontra never capitalize the immovable property constructed

As it has been constructed for employer

Hence 17(5)(d)

Not applicable here and the ITC on inword supply of goods , services or both used in construction of immovable property

By contractor or Subcontractor is available to them..

[KASTURI SETHI]

Query-wise reply is as under:-

1. Yes.

2.Yes

3.Yes.

4.Yes.

I also concur with both replies of Ms.Pavan Mahulkar. Regarding exemption care has to be taken of Notification No.11/17-CT(Rate) and 12/17-CT(Rate) as amended from time to time (last amended on 31.12.2018). In this scenario, no exemption has available for the services supplied to Govt. Regarding exemption, it is pertinent to go through the decision of AAR :-

2018 (19) G.S.T.L. 537 (A.A.R. - GST) = 2018 (11) TMI 1349 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN IN RE : KAILASH CHANDRA

[KASTURI SETHI]

One will have to muster courage and confidence to avail ITC on the input/input services in providing Works Contract Service.

[KASTURI SETHI]

This decision of AAAR, Rajasthan is also relevant and helpful to arrive at some concrete conclusion.

2019 (3) TMI 1076 - APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN IN RE: NAGAUR MUKUNDGARH HIGHWYS PVT. LTD., UDAIPUR (NMHPL)

AI Summary

Input Tax Credit availability for works contract services affirmed for contractors and subcontractors, subject to exemption notifications check. ITC on materials, capital goods and works contract services used in construction for a government or private employer is available: supplies from subcontractors used by the principal contractor qualify as inputs for further supply and are not blocked by section 17(5)(c), and section 17(5)(d) does not apply because contractors/subcontractors do not capitalise the immovable property constructed for an employer. Check applicable exemption notifications before availing credit.