Dear Friends
Mr. X is a works contractor registered in Delhi and he builds his own office in Delhi.
What are the tax implications in this case?
Regards
Shivani
CA Shivam Arora
(Chartered Accountant)
(2414 Points)
Replied 03 July 2018
Yes, he will not get the ITC as such ITC is blocked u/s 17(5).
Jeeva Thangavelu
(Student CA Final )
(609 Points)
Replied 03 July 2018
Yes, only ITC from related purchases cannot be calimed. No other tax implications.
Shivam RC
(Student)
(23683 Points)
Replied 03 July 2018
Shivani
(Learner)
(1881 Points)
Replied 04 July 2018
Dear Friends
My question related to above query is
Whether this qualifies as supply at first place?
In service tax two parties were required for an activity to be service.
But in GST nothing as such is mentioned in section 7.
So does it qualifiy as supply?
regards
shivani
Shashank Saxena
(Student CA Final )
(96 Points)
Replied 04 July 2018
For any activity to be treated as supply, the following elements are required to be satisfied:
1) The activity involves supply of goods or services or both.
2) The supply is for a consideration unless otherwise specifically provided under Schedule I.
3) The supply is made in the course or furtherance of business.
4) The supply is made in the taxable territory.
Considering above points i would like to answer your query in two parts:
a) Same PAN Single Registration (i.e. service provided to itself)
Supply: It would not be treated as supply since consideration is not involved.
ITC: Credit of goods used in such transaction would fall under Sec 17(5) of Block Credit and credit taken on those goods would be added back in output tax liability of the assessee.
b) Same PAN Multiple Registration (i.e. Service provided to Deemed Distinct Person/ Related Person)
Supply: It would be treated as supply because of Schedule I which provides that supply of goods or services or both without consideration to deemed distinct person or related person in the course or furtherance of business would be treated as supply.
ITC: ITC to to service provider would be available but would be blocked to the recepient i.e. deemed distinct/ related person.
Shivani
(Learner)
(1881 Points)
Replied 05 July 2018
Hi Shashank
thanks for your reply.
but i dont agree with something u wrote in part (a)
ITC will be denied but how can it be added to output tax liabiilty of works contractor !!
it will just become its cost not part of its output tax liabiity.
You already denied if credit of tax he paid on his purchases, now you cant ask him to pay it again as part of his OTL.
regards
shivani
Shashank Saxena
(Student CA Final )
(96 Points)
Replied 05 July 2018
In part (a) 2 situations are possible:
1) You bought goods specifically for personal use .In such case you would not transfer such credit to credit register since it is a block credit u/s 17(5).
2) In second situation, it is possible that you bought the goods for business purposes only, which were lying in your stock and the credit of which you have already availed and utilized. Later on you used that goods for personal purpose but since you have already utilized the credit on such goods, you can not reverse it now. Therefore,you will have to pay the equivalent amount by adding it to your output tax liability.
I wrote my previous answer keeping in mind the second situation.
CA Shivam Arora
(Chartered Accountant)
(2414 Points)
Replied 05 July 2018
| Originally posted by : Shivani | ||
 |
Dear Friends My question related to above query is Whether this qualifies as supply at first place? In service tax two parties were required for an activity to be service. But in GST nothing as such is mentioned in section 7. So does it qualifiy as supply? regards shivani |
 |
1)From supplier of material and labour point of view--
2) From works contractor point of view-
If you have already availed the above-mentioned ITC by mistake, then reverse the ITC sub-row 2 of row B of Table 4(ITC Reversed-Others).(As per my logic extracted from circular 26/2017-dated 29.12.2017). Interest @ 24%p.a. to be paid.
If you have already availed and utilised the above-mentioned ITC by mistake, then reverse the ITC sub-row 2 of row B of Table 4(ITC Reversed-Others) or pay through cash.(As per circular 26/2017-dated 29.12.2017).Interest @ 24%p.a. to be paid.
Shivani
(Learner)
(1881 Points)
Replied 06 July 2018
dear friends
thank u all. i got the point.
However in all above replies we are assuming that works contractor is undertaking works-contract for self (business use) on his GSTIN.
But cant he just take up this work in his personal capacity and not under his GSTIN?
In such case nothing will show under his business books of accounts.
Or is it that just because he has taken registration as works contractor, he MUST route this activity under GSTIN and thus show in his business books?
If an ordinary person go for constrcuting his house or office, he just buy material and hire labour. Cant this works contractor do the same and avoid showing it in his business books as he can say that he did it in his personal capacity?
Regards
shvani
CA Shivam Arora
(Chartered Accountant)
(2414 Points)
Replied 06 July 2018
Yes he can claim that he constructed in his personal capacity but afterwards when he will use it for business he is liable to show it in his books of accounts as capital introduced. So, what's the use?
Note: The answer have been given keeping in mind that the constitution of business is proprietorship.
LIVE Form 10 B and Form 10BB: Handle Tax Audit Reports of Charitable Organizations(with recording)
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