Rama chary Rachakonda
(Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294)
(5134 Points)
Replied 16 July 2024
Works Contract and Construction Activities Eligibility for ITC:
Works Contract: A works contract involves building, construction, fabrication, erection, installation, repair, maintenance, renovation, alteration, or commissioning of any immovable property where there is a transfer of property in goods (whether as goods or in some other form). However, this definition no longer covers works performed on movable property.
Construction: Construction includes re-construction, renovation, additions, alterations, or repairs to immovable property. For any work to qualify as construction, the cost of construction must be capitalized in the books of accounts.
ITC Restrictions:
ITC is not available on works contract services when supplied for the construction of an immovable property (other than plant and machinery), unless it is an input service for further supply of works contract service.
Goods or services received by a taxable person for the construction of an immovable property (other than plant or machinery) on their own account are also ineligible for ITC.
Exception: Works contract and construction activities are eligible for ITC if done in respect of plant and machinery. Plant and machinery are specifically defined as equipment or apparatus attached to the earth by foundation or structural support used for the supply of goods or services1.
Specific Scenario:
Suppose XYZ Contractors are constructing an immovable property. They cannot claim any ITC on the works contract for that property, except when the input service is used for further work contract services2.
Remember that the availability of ITC depends on the specific circumstances and the nature of the transaction. If you have any further questions or need additional clarification, feel free to ask!
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