GST ITC on Work-in-Progress : Issues and suggestions

By | August 17, 2017
(Last Updated On: August 17, 2017)

Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India

3. Availment of credit of input tax on Work-in-Progress

Section 18(1) of CGST Act, 2017 provides that Subject to such conditions and restrictions as may be prescribed-

(a) A person who has applied for registration under the Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall, be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this
Act.

(b) A person, who takes registration under sub-section (3) of section 25 shall, be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi- finished or finished goods held in stock on the day immediately preceding the date of grant of registration.

(c) Where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi- finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9

PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be prescribed

(d) Where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply
becomes taxable:

PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be prescribed.

Issue

As per the aforesaid provision, credit of tax paid on inputs held in stock, inputs contained in finished and semi-finished goods shall be allowed. However, there is no provision for claiming credit of stock of inputs contained in case of work in progress of works contract services. In semi-finished works contracts or work in progress, to keep
it at par with goods, credit of inputs contained in work-in progress needs to be allowed.

Suggestion

It is suggested that to bring in parity, input tax credit of inputs contained in semi finished works contract be allowed.

Read ICAI Suggestions on GST Act to Govt : July 2017

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