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

Query on ITC Eligibility for Works Contract Services Citing Gujarat Authority's Favorable Ruling on Reusable Capital Goods A participant raised a query about Input Tax Credit (ITC) under works contract services, suggesting that ITC should be allowed for input goods and services used in output works contract services, except when the property in goods is not transferred to the contractee. The query highlighted the use of cranes and scaffolding as capital goods, which are reused, with the contractee providing construction materials. The respondent noted that a final opinion requires reviewing the contract terms but referenced a favorable decision by the Gujarat Authority for Advance Ruling, which, while not binding, could be persuasive.