Input tax credit for purchases

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This discussion clarifies the admissibility of Input Tax Credit (ITC) for contractors engaged in road laying work for government agencies. The contractor can claim ITC on GST paid for materials such as cement, steel, and bitumen used in the works contract. The government agency is responsible for releasing the full GST amount charged by the contractor, without deducting the ITC availed by them.

sunder r

sunder r (Querist)

12 October 2021 Contractor ‘A’ undertakes work contract of road laying on behalf of government agency. Total value of the work contract was Rs. 1.00 crore exclusive of GST. While making payment to the contractor the Agency pays Rs. 1.00 crore towards value of the contract and 12.00 lakh toward payment of GST (12%). For laying road, the contractor utilized materials viz., Cement, steel, bitumen etc., costing Rs. 60.00 lakhs which include payment of GST of Rs. 9.80 lakh (approx.) My questions in this connection are as under:
1. Whether ITC (under GST) is admissible to the contractor for GST payments made by him towards purchase of Cement, Steel, bitumen etc.,
2. Should the Government agency take into consideration of ITC availed by the contractor and release only the difference towards GST i.e. Rs. 12.00 lakh minus Rs. 9.80 lakh?
Experts may please clarify. Thanks in Advance.

Udaya Chandran

Udaya Chandran (Expert)

12 October 2021 1> Yes, you can take ITC as you're providing outward taxable supply of works contract service
2> No, Govt pays full GST amount as charged in the invoice raised by you

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CA Pradeep Sharma

CA Pradeep Sharma (Expert)

12 October 2021 1. You can the ITC on GST paid towards purchase of Cement, Steel, Bitumen (NN-11/2017-Central Tax (Rate) - dated 28th June' 2017

2. Government will release the complete amount of Rs.12 Lac. You can take input

🖋#for more GST matters, queries and updating please follow us on you tube @CA Pradeep Sharma, Twitter and LinkedIn

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