“Section 17 (5) :- 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 the following namely:
.
.
.
.
.
(c ) works contract
services (WCS) 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 or services or both received
by a taxable person for construction
of an immovable property (other than plant or machinery) on his own account including when such
goods or services or both are used in the course or furtherance of business.”
Now question arise whether a works contractor can avail input tax
credit for the tax paid on it’s inward supply of goods (i.e. input) or services
or it is restricted as per section 17(5) (c) & (d) of the CGST Act,2017?
First thing to note is that Input Tax
credit (ITC) can be availed by the person (i.e. Registered person) who is procuring goods or services and
such goods or service or both must be inward
supply for that registered person.
Clause (c ) of section 17(5) impose
restriction on ITC of service ONLY (i.e.
wroks contract service ) while clause (d ) of the section impose restriction on
input and input service BOTH.
In case of clause (c ) it would be
worthwhile to note that if your Inward supply is ‘works contract service’ but
outward supply does not fall under “works
contract service” ,you will not be eligible to avail ITC of WCS.
For example :- A chartered Accountant
gives a contract to Mr.X for constructing his office , GST charged by Mr.X
would not be available as ITC to Chartered Account.
However if Mr.X further contracted with
Mr.Y to construct CA office, GST charged by Mr.Y would be available as ITC to
Mr.X.
In same example:- Mr. X hires Architect
for map, Manpower supply agency for labour, purchase cement, brick, electrical fitting
items etc so that he can execute his contract of office construction.
Now question arise whether service of
architect and manpower agency would fall under “works contract service” ,definitely
NO answer is. And ITC of GST charged by them cannot be denied on the basis of
clause (c )of the section 17(5) and ITC of material would be available because
clause (c) does not impose restriction on Input.
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