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Block credit - Works contract services use construction of an immovable property (except plant & machinery) [section 17(5)(c)] - GST Ready Reckoner - GSTExtract Block credit - Works contract services use construction of an immovable property Section 17 (5) Clauses (c) Works contract services supplied for construction of an immovable property (except Plant Machinery) 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. In other words, Input tax credit for any tax paid on work contract services shall be available in the following cases When supplied for construction of plant and machinery where it is an input services for further supply of work contract services Meaning of Work contract define in section 2(119) of CGST Act Works contract means contract for building ,construction, fabrication, completion, erection installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property where in transfer of property in goods ( whether as goods other form) is involved in the execution of such contract. Meaning of construction define in the explanation for the purpose of clauses (c) of section 17(5) of CGST Act Construction means includes re -construction, renovation, addition or alteration or repairs to extent of capitalization to said immovable property. Meaning of plant machinery define in the explanation for the section 17(5) of CGST Act Plant Machinery means apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes Land, building or any civil structures, Telecommunication tower, Pipelines laid outside the factory premises. Examples Example 1:- M/s Manisha project Pvt. Ltd. has been awarded a work contract for construction of road by NHAI. M/s Manish project Pvt. Ltd. has appointed sub contractor M/s Aayush enterprises for his purpose of construction of road. In this case M/s Manish Project Pvt. Ltd. and M/s Aayush Enterprises provide work contact services for construction of immovable property, Input tax credit for the tax charged by M/s Manish Project Pvt. Ltd. would be not available to NHAI since latter is not providing work contract services of construction of to immovable property. M/s Manish Project Pvt. Ltd. is providing work contract services of construction of immovable property, he is eligible to credit for the amount of tax charged by M/s Aayush Enterprises. Example 2:- Shiva Ltd. an automobile company, has availed work contract services for construction of a foundation on which a machinery (to be used in the production process) is to mounted permanently. In this case, in the view of the above mentioned provisions, ITC available in respect of work contract services availed by Shiva Ltd. as the same is used for construction of plant machinery which is not blocked under section 17(5)(c). It is assumed that the expenditure incurred toward contract services is capitalization in the books of of Shiva ltd. and no depreciation has been claimed on tax component. Example 3:- M/s ABC awarded a work contract for construct a shed to protect plant and machinery is civil structure by the M/s Frozen Foods Ltd. Input tax credit for the tax charged by M/s ABC is available to M/s Frozen Foods Ltd ? In this case, in the view of the above mentioned provision in section 17(5)(c), shed on plant machinery is not a plant machinery and the work contract services is not for the further supply of work contract services, ITC thereon will not allowed. Example 4:- ABC Ltd. A registered supplier is engaged in the manufacture of dyeing machine, availed work contract services from M/s Yakkob enterprises for erection and installation of RO treatment plant in factory and capitalization in the books of account. In that case, works contract services for erection of installation of RO treatment plant in factory, works contract services used for construction of plant and machinery fixed to earth by foundation or structural support RO treatment plant installed in the factory is to be used for making outward supply of dyeing machines, it should be capitalization in books of account as plant and machinery. ITC for the tax charged by M/s Yakkob enterprises is allowed to ABC Ltd. Example 5:- Jugal enterprises is manufacture of bakery items he take gas connection from IGL ltd. and installed a gas pipe for carry gas upto the factory gate. for the installation of gas pipe line awarded a works contract to M/s Yatin Enterprises. In this case, Works contract services in relation to plant and machinery work contract services in relation to plant and machinery to the extent of capitalization in the books of account but as per definition provided in explanation in section 17(5) does not included in the plant and machinery pipe line laid down outside factory premises. In that case ITC for tax charge by M/s Yatin Enterprises is not available to Jugal enterprises.
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