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ITC eligibility on works contract and construction activities

Goods and Services Tax - GST - By: - Saurabh Chokhra - Dated:- 2-2-2019 Last Replied Date:- 13-2-2019 - Topic: Impacted Industry: Construction, Works Contract Definition of works contract and construction under GST law Works contract has been defined u/s 2(119) of the CGST Act, 2017 as a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable propert .....

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and Equipments issued by the Institute of Chartered Accountants of India and notified by the Ministry of Corporate Affairs (MCA). ITC provisions on works contract and construction activity Section 17(5)(c) and (d) of the Act restricts certain credits, these provisions read as under .......... 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; d) goods .....

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ruction activity is eligible for ITC if done in respect of plant and machinery. Plant and machinery has been specifically defined as any equipment, apparatus attached to earth by foundation or structural support used for supply of goods or services. Plant and machinery to specifically exclude telecom towers, pipelines etc. Works contract and Construction- How they are different: As per the definition of works contract, the works contract inter-alia include construction of any immovable property .....

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not been defined in GST law. Immovable property is defined in Section 3(26) of the General Clauses Act, 1897 to include land, benefits to arise out of land and things ATTACHED TO THE EARTH, or permanently fastened to anything attached to the earth. Further, test of immovable property to be applied on the totality basis. For instance- the doors of building are movable and can be removed but the same are integral part of building and to be treated as immovable property. Further, test of immovable .....

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to complete a room will be integral part of the building and therefore, will be immovable property if seen along with building. Fixing of door is alteration/addition to building (immovable property) is covered in the definition of construction as defined under sec 17(5)(c) and (d) and therefore, works contract, if the cost of renovation is capitalised. ITC not available if the cost of construction is capitalised. If the cost charged to revenue then ITC is available. 3. Renovation of security off .....

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ity is not even in nature of works contract or construction. Conclusion: Determination of ITC eligibility on works contract and construction services is bit different in GST regime as compared to service tax/excise regime as in the GST regime capitalisation of cost or charging off the same to P&L carry paramount importance in deciding the eligibility or otherwise. Further, ITC not allowed only in case of immovable property that to other than plant & machinery. - Thanks for reading the ar .....

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