Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India
2. Availability of ITC in case of works contract services
Section 17(5)(c) of the CGST Act, 2017 provides that notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of works contract services when supplied for construction of immovable property, (other than plant and machinery), except where it
is an input service for further supply of works contract service.
In the given section, a technical view can be taken that ‘construction services’ provider can be denied credit of ‘works contract’ service. In case a builder / developer is selling under constructed flats, such input tax credit will be used to provide a construction service as the builder / developer. Though construction is a part of works contract, both are different limbs in Schedule II. Usage of term “works contract services” creates a concern whether it is description of activity / supply or requirement of exact back-to-back supply.
Whether output is called ‘construction services’ or ‘works contract service’, credit should not be denied. The input service of works contract needs to be passed on not only to another works contractor but also to persons who provide any ‘Construction service’
It be suitably provided that for the purpose of section 17(5)(c) from the point of ITC claimant ‘works contract service’ and ‘construction service’ be treated at par.
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