GST ITC available on Taxable Works Contract Services for Construction of Hotel Building

The Hon’ble Tripura High Court in M/s. SR Constructions v. The Union of India and Ors.[W.P.(C) No. 399 of 2022 dated April 4, 2023]held that the assessee is entitled to take Input Tax Credit ("ITC") on taxable works contract services availed for the supply of construction ofan immovable property. 

Facts

M/s. SR Constructions ("the Petitioner") is a construction company, entered into a contract with M/s Hotel Polo Pvt. Ltd. to construct a hotel. For providing output service of works contract services, the Petitioner received inward supply of various goods and services and paid GST on the same. 

The Revenue Department issued a  Show Cause Notice dated September 30, 2019 ("the SCN") demanding ITC under Section 74(1) of the Central Goods and Service Tax Act, 2017 ("the CGST Act") on the grounds that the Petitioner has availed ITC in violation of Section 17(5)(c) of the CGST Act.

The Petitioner filed reply to the SCN however, the adjudicating authority passed the orderupholding the demand vide an Order dated October 13, 2020 ("the Order in Original"). 

Aggrieved by the Order in Original passed by the adjudicating authority the Petitioner filed an appeal before the Appellate authority, whereby the Appellate authority vide Order in Appeal No.07/GHY (A)/Addl. Commr/CGST-AGT/2022 dated February 1, 2022 ("the Impugned Order") confirmed the demand raised by the Adjudicating authority. 

Aggrieved by the Impugned Order the Petitioner filed a writ before the Hon’ble Tripura High Court. 

Issue

Whether the Petitioner is entitled to avail ITC on the goods and services utilized for providing construction services to hotel building?

Held

The Hon’ble Tripura High Court in WP (C) 399 OF 2022 held as under:

• Observed that, the petitioner has fulfilled all the conditions of works contract and is providing work contract services to the owner of the hotel and not using on its own. 
• Further observed that, the Petitioner has been providing construction services to the owner of the building and hence do not fall within the definition of Section 17(5)(c) of the CGST Act and is entitled to take ITC on the goods and services utilized for providing the taxable work contract services.
• Held that, the demand raised by the Revenue Department vide the SCN is ultra vires and is contrary to law and thus, the Impugned Order is liable to be set aside and quashed.

Relevant Provisions

Section 17(5)(c) of the CGST Act

"(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18, input tax credit shall not be available in respect of the following, namely:
…………………………
(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service."