ITC under works contract

[YUWRAJ KOTHARI]

I request you to revisit my Issue ID. 115826. To my interpretation, ITC will be denied of input (by way of) Works contract services unless it is an input service for further supply of output works contract service. Thus, in rest of cases:

ITC on input of goods, input of services when used in business of output works contract service has to be allowed.

On works contract output, corresponding Works contract services availed, ITC has to be allowed. Such inputs used may be of capital goods, thus ITC shall be allowed.

In the matter involved in this issue, Crane is capital good, scaffolding goods and hardware items are used only as support for slab to be filled in. Afterwards, they are removed and used again for another slab. No property in goods get passed to contractee. Only binding wire (which is used to tie iron rods) cannot be removed, But in any case, the assessee is paying on full value @ 18%. Predominantly it is labour job, Binding wire passes incidentally. Each and every construction material is provided by contractee.

I hope the issue is cleared by me, as I right on my interpretation with applicability to capital asset input. The main point is that the CRANE used here shall again be used in some other project whereas entire ITC is going to be claimed here.

[KASTURI SETHI]

Final opinion can be given only after going through the terms and conditions of the contract. However, the following decision of AAR, Gujarat (in favour of the party) may be helpful to you :-

2019 (29) GSTL.40 (AAR-GST) = 2019 (8) TMI 1217 - AUTHORITY FOR ADVANCE RULING, GUJARAT Applicant : Dholera Industrial City Development Project Ltd.

Although this decision is not binding on an other person (except applicant) , yet this decision has persuasive value.

AI Summary

Input tax credit on works contract: ITC permitted where goods or services are inputs used in supplying works contract services. ITC for works contracts depends on whether goods or services are inputs used in supplying the output works contract service; capital goods and removable temporary works used across projects (such as cranes and scaffolding) qualify as inputs for ITC when they do not result in transfer of property to the contractee. Determination requires examination of contract terms and factual use, and persuasive advance rulings may inform but do not bind other persons.