Eligibility of ITC as per Circular 241/35/2024 Dtd 31.12.2024

[A SREENIVASARAO AND ASSOCIATES]

Dear Experts,

1. I am a dealer engaged in the trading of construction materials supplied by a manufacturer-cum-supplier from Maharashtra. The terms of supply are Ex-Works (EXW). Freight is arranged by the supplier, and the cost of freight is borne by me. The invoice issued by the supplier contains the cost of the goods as well as the transit insurance charges.
2. The transit insurance claim is to be lodged by the supplier in case of any damage to the goods, based on the information provided by me. The supplier shall receive the insurance compensation, which shall be fully returned to me without any retention by the supplier.
3. The goods are dispatched to the transporter at the factory gate, and the risk in the goods is upon me. In other words, I am liable to pay the supplier for any loss or damage occurring during transit, irrespective of whether the insurance company has settled the claim or not.
4. As per Circular No. 241 dated 31-12-2024, with respect to insurance claims and risk allocation, Paragraph 3.3(c) explicitly sets out the parameters of an Ex-Works (EXW) delivery qualifying for ITC. It states that where insurance is arranged, it is done on behalf of the dealer and that "any claim in case of loss has to be lodged by the dealer."
5. In the above scenario, my queries are as follows:

a. Whether I am eligible to claim ITC as deemed receipt of goods under Section 16(2)(b) read with Circular No. 241?

b. Whether the property in the goods stands transferred from the supplier to me in the above scenario?

c. Whether the above transaction constitutes a standard Ex-Works (EXW) contract as defined under Circular No. 241?

AI Summary

Input tax credit on ex-works supplies depends on deemed receipt, risk allocation, and insurance-claim arrangements.
Input tax credit as deemed receipt is questioned where construction materials are supplied on Ex-Works terms, freight costs are borne by the dealer, and transit risk passes at the factory gate. Although the supplier lodges transit-insurance claims and remits the compensation to the dealer, EXW qualification requires insurance to be arranged on the dealer's behalf and loss claims to be lodged by the dealer. The issues include ITC eligibility, transfer of property, and conformity with EXW parameters.