REFUND ON WORKS CONTRACT - INVERTED DUTY STRUCTURE

[RV PERUMAL]

A WORKS CONTRACTOR HAS AN EXCESS BALANCE OF TAX ( INPUT TAX IS MORE THAN HIS OUTPUT TAX BECAUSE OF HIGH CEMENT CONSUMPTION AND STEEL) WHETHER HE IS ELIGIBLE TO GET REFUND FROM THE GST DEPARTMENT. PLEASE GUIDE ME TO GET THE REFUND

[KASTURI SETHI]

Have you perused Notification No.15/17-CT(R) dated 28.6.17 ?

[Shilpi Jain]

If this output service does not fall in entry 5(b) of sch II he would be eligible for the refund as per formula in rules

[PARALIJAYAPALAN ANILKUMAR]

A lot of confusion and ambiguity exists in this area as to the disentitlement on the premise of contract service falling under 5 (b) of Schedule-II.. In my view all contract service is not contemplated in the Notification 15/2017. The disqualification would appear to be confined only to contract service resulting in construction of flats and similar buildings which are sold after completion as immovable property by way of receipt of consideration after such completion.

[Rakesh Garg]

As per N. No. 15/2017-CT(R) dated 28 June 2017, no refund of unutilized ITC shall be allowed under sec 54(3) of the GST Act, in case of a supply of services specified in sub-item (b) of item 5 of Schedule II of the GST Act.

However, works contract is covered in sub-item (a) of item 6 of Schedule II.

Since the legislature itself has considered these two categories differently; there is no specific bar to the works contractor in claiming GST refund under the inverted duty structure.

[Rakesh Garg]

You may also refer the following AAR....

DAEWOO-TPL JV - 2019 (7) TMI 1229 [AAR, MAHARASHTRA]

Para 5.2...We find that M/S Daewoo-TPL J V, a joint venture between M/s Daewoo Engineering and Construction Company Limited and M/s. Tata Projects Limited is registered under the GST Act and have been awarded the contract from MTHL in the form of works contract. The contract in the nature of services. Execution of construction of large projects such as MTHL Project entails procurement of various inputs, input services and capital goods such as cement, concrete, steel and steel structures, bridge accessories, formworks, plant and equipment, labour, etc. All such goods and services attract GST at varied rates, depending on the nature of such procurement. The ITC paid on the inputs and services are higher than output supply. Therefore, the transaction is covered under Inverted duty structure. In such cases as in the subject case, to avoid the cascading effect, Govt. has allowed relief in the form of Refund of unutilized Input tax Credit

[RV PERUMAL]

THANKS TO ALL FOR YOUR KIND REPLIES

AI Summary

Inverted duty structure refunds: works contractors can claim unutilized input tax credit where contract not covered by immovable-property exclusion. Where a works contractor's input tax credit exceeds output tax under an inverted duty structure, refund eligibility turns on whether the supply is excluded by the Schedule II immovable-property treatment; the refund-exclusion notification targets that immovable-property category and does not automatically bar works contracts, which are separately classified, from claiming refunds under the statutory refund formula; administrative rulings have recognised refund relief for large works contracts to prevent cascading where ITC exceeds output tax.