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Works contract services regarding

27 September 2020

kindly clarify if the ITC available on only plant and machinery as per section 17 (5) for works contract services, then ITC on building, commercial complex, factory premises etc is available or not, if available, what are provisions.

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Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 28 September 2020

1 Section 17(5)(c) of CGST Act is reproduced as under :
(c) work contract services when supplied for construction of immovable property (other than p&m) EXCEPT where it is input services for the further supply of work contract service.

The above section States that , ITC is available to work Contractor & it is also available to Recepeint who is further supplying it.
For example a building developer may engage services of a subcontractor for certain portion of the whole work. The subcontractor will charge GST in the tax invoice raised on the main contractor. The main contractor will be entitled to take ITC on the tax invoice raised by his sub-contractor as his output is works contract service. However if the main contractor provides works contract service (other than for plant and machinery) to a company say in the IT business, the ITC of GST paid on the invoice raised by the works contractor will not be available to the IT Company.

1 Section 17(5)(d) of CGST Act : In this sub section ITC is not available in respect of Goods or services received by taxable person for construction of immovable property on his OWN account including when such goods or services are used in the course or furtherance of Business.
Hence it is restricted to claim ITC to the taxable person even if it is used in course & furtherance of business .as can refer above example , the IT company is not allowed to take ITC.
But of we read the Explanation under clause (d) , the ITC is not available on expenses which is capitalise to Immovable Property.
So if such expenses is not capitalise to Immovable Property or book as revenue expenditure (Repairs) the ITC is available.

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Vikasanand Gupta (180 Points)
Replied 28 September 2020

Thanks sir, but in the Ist Example, the itc is available to the main contractor when the sub contractor is in picture and ITC not available to the service recipient having owner of immovable property.

if the sub contractor is not come in picture, where the main contractor is rendering service to the owner of the building, In this condition the itc is not available to the owner.
am I correct. if not pls clarify sir.

Anshuman Basu (account -GST) (1556 Points)
Replied 28 September 2020

Sir my question is
if a company do for renovation of his office , given a order to civil contractor and when contractor generated a invoice to company in that case company not avail to take ITC.
am I right? because company out put business not work contractor business.But if company treat the invoice as repairing expenses in that case he should take ITC.
pl clarify

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 28 September 2020

Yes correct @ amshuman Basu.

@ Vikasanand , yes if main contractor is rendering his services to owner of building ITC is not available to owner of building.

Anshuman Basu (account -GST) (1556 Points)
Replied 28 September 2020

It is not clear for me if company treat the invoice of contractor as repairing expenses in PL a/c in that case he should take ITC.

What is rule say....

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Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 28 September 2020

Dear Anshuman
Yes .... if you treated as repair the ITC is available.
Now suppose Iam doing my business in rented place , I cannot captilise such Expenses to building account , as I do not own the building. So that case I can claim ITC on same.