ITC on material issued to Contractor

[SUSHANTA MISHRA]

M/s ABC Hydro Ltd is engaged in the business of generation of Electricity. It has four hydro electric project in the state of Himachal Pradesh. The company has started construction of a new hydro electric project in the state of HP. The company has awarded a contract for construction of dam to M/s X Ltd. As per terms of contract M/s ABC (contractee) shall supply Cement and Steel to M/s X, (contractor) on recoverable basis to maintain quality . Accordingly M/s ABC Ltd purchased Cement and Steel from manufacturer with GST paid invoices and issued the materials (cement and steel) to M/s X by raising GST invoice. Whether M/s ABC can claim ITC? Will it not covered under Block credit under Sec 17(5)(d) as the inputs are used for works account for own use? May please clarify.

[Ganeshan Kalyani]

For this particular transaction M/a. ABC will considered as trading and thus becomes eligible for credit.

[Himansu Sekhar]

ABC can take the credit. The supply of goods happened by ABC to x. It was also open for x to buy goods from market instead of abc. It is a separate transaction.

AI Summary

ABC Hydro Can Claim Input Tax Credit on Cement and Steel Supplied to Contractor Under GST Section 17(5)(d) M/s ABC Hydro Ltd, involved in electricity generation, has contracted M/s X Ltd for constructing a dam in Himachal Pradesh. M/s ABC supplies cement and steel to M/s X on a recoverable basis, purchasing these materials with GST paid invoices and issuing them to M/s X with a GST invoice. The query is whether M/s ABC can claim Input Tax Credit (ITC) on these materials, considering potential restrictions under Section 17(5)(d) of the GST Act. Responses indicate that M/s ABC can claim ITC as the transaction is considered trading, and M/s X could have independently purchased the materials.