M/s SS Enterprises is Civil and Electric Work Contractor Company. His main business is Work Contract Service provide to various Government and Corporate client. M/s SS Enterprises usally get order from Local Body as well as Corporate Sector, Building Developer etc via tender or Bidding.
Recently M/s SS Enterprises get order from a Corporate Client (M/s XYZ) who is Manufacture of Garments product for Construction, Renovation and Electrical Work of their office cum factory premises. Name of the Service is “Supply Erection, installation and Commissioning”
The Order Value is Rs 97Lakh/- including all like Materials, Service Charge, labor and GST.
Please not all parties are in same state in West Bengal
For Complete the work(Construction, Renovation and Electrical Work -order by M/s XYZ ) M/s SS Enterprises purchase Bricks, Electrical Fitting like Lamp, Wire, Cement, Sand TMT Bar, Ware Rope etc as a raw material.
M/s SS Enterprises not appoint any sub contractor for finished work.
Now the question is :
1/ ls M/s SS Enterprises can claim ITC for those purchases? And what is the restriction of section 17(5)?
2/ How M/s SS Enterprises make Bill? I want to know what is the Taxable value and What is GST amount?
3/-What is the Tax treatment and ITC claim in A/c of M/s XYZ.
4/ Please tell me what is the rate of tax for electrical contractor who Supply Goods & Services to Govt (Govt Works). How to calculate the tax amount. And is ITC available on Purchases?
Answer to Q1) :
YES. M/s SS Enterprises is eligible to claim ITC on purchase of inputs like bricks, electrical fittings like lamp, wire, Cement, Sand, TMT Bars etc. For you, these are the inputs which are required for the output service ( course of business ). And as per the Provision of Section 16(1) of the CGST Act 2017, Input Tax Credit ( ITC ) on Inputs, Input Services and Capital Goods 'used in the course or furtherance of business' can be claimed. Hence M/s SS Enterprises is eligible to claim ITC subject to fulfillment of the 4 conditions as laid down u/s 16(2) of the CGST Act 2017.
As far Section 17(5) - BLOCKED CREDIT is concerned, the Recipient ( in your case M/s XYZ Ltd ) is not eligible to claim ITC on GST paid for the Works Contract Services supplied by M/s SS Enterprises. It is specifically Blocked under Section 17(5) clause (c) of the CGST Act 2017. Section 17(5)(c) needs to be read from the recipients point of view and not the supplier.
Answer to Q2) :
As per the Provision of Section 15(1) of the CGST Act 2017, GST is levied on the "TRANSACTION VALUE."
Now for calculating this Transaction Value, there are some items which needs to be added to it ( Section 15(2) ) and some items which needs to be deducted from it ( Section 15(3) ). Items like Taxes other than GST, Amount that the supplier is liable to pay but which has been incurred by the recipient, Incidental Expenses, Interest or late fees or Penalty for delayed payment of any consideration etc is required to be added with your Transaction Value. Kindly note that Transaction Value "does not include GST."
So the Taxable Value / Transaction Value will be Rs. 97 lakhs less the amount of CGST, WBSGST ( since 97 lakhs include GST portion ) and then GST needs to be charged separately. Now the GST Amount depends upon your Transaction Value (TV). First calculate TV on the basis of Section 15(2) and 15(3) and then GST shall be levied @ 18% on the Transaction Value.
Answer to Q3) :
As far as M/s XYZ is concerned, he needs to pay the consideration along with GST @ 18% for the Works Contract Services to M/s SS Enterprises. And M/s XYZ will not be eligible to claim ITC on this 18% GST paid since it is a Blocked Credit under Section 17(5) clause (c) of the CGST Act 2017. This Ineligible ITC needs to be reported in Table No. 4(D) column (1) of FORM GSTR-3B by M/s XYZ.
Answer to Q4).
GST Rate : 12% ( for Govt Works ).
SAC Code : 9954
How to calculate the tax amount ? : In accordance with the Provision of Section 15 ( as explained above ).
ITC is Available to the Works Contractor for the Inputs, Input Services and Capital Goods used for supplying the service subject to fulfillment of Section 16(2) four conditions.
I hope you understood Sir. I have explained all your questions in a detailed manner along with the reference of GST Law. If still problem persists, you can contact me in Personal Message box.
Thanks and Regards,
Shivam RC.
CAclubindia
