Circular No.173/2022

[Ethirajan Parthasarathy]

A Supplier is engaged in works contract service and is entitled to concessional rate of 12% for such contracts to local bodies.

Most of the materials needed for executing the state supply attract GST at 18% and also 28%.

Circular no 173/ dt 06/07/2022 provides for refund of accumulated ITC on account of outward supply at a concessional rate.

Most part of the circular gives emphasis on applicability of this circular only for supply of goods at concessional rate. However there is reference of outward services at concessional rate in the last but one line of para 4 of the said circular.

Can experts confirm whether service provider are also entitled to benefit conferred by Circular no. 173/ dt 06/07/2022.

AI Summary

Inverted duty refund available for eligible works contract supplies, while entitlement for input services remains legally contested after formula change.
Refund under the inverted duty structure is available in respect of outward supplies at concessional rates and is tied to ITC on inputs used in making the supply. The circular does not limit outward supply to goods, so eligible outward services (including most works contract services) can qualify. A recent amendment to the refund formula acknowledges use of both inputs and input services to discharge tax, producing higher refunds, but commentators disagree whether that amendment creates a standalone refund entitlement for ITC on input services or simply increases refunds attributable to inputs.