ITC on IGST

This query is : Resolved

Sanjeev (Querist)
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07 February 2025 Sir
One psu entered into two contacts first is off shore supply contract (pure supply contract) and import mandatory spare from foreign and contractor/company paid custom duty under project import with igst.
further company was entered into second separate contract civil contract with same firm.

Query-
(1) Can contactor eligible for itc of igst on project import under off shore supply contract?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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12 August 2025 Background:
IGST is paid on imported goods (including project imports).

Input Tax Credit (ITC) on IGST can be claimed if the goods/services are used in the course or furtherance of business.

Different contracts are involved:

Contract 1: Offshore supply (pure supply contract), importing mandatory spares with IGST paid.

Contract 2: Civil contract with the same firm (separate contract).

Query:
Can the contractor claim ITC of IGST paid on project import under the offshore supply contract?

Explanation:
Project Import and ITC Eligibility:

If the imported goods are used in the contractor’s business (for executing the contract), then IGST paid on import is eligible for ITC.

The condition is that the goods are used in the course or furtherance of business.

Separate Contracts and ITC:

Having two separate contracts with the same firm does not disallow claiming ITC on IGST.

ITC eligibility depends on whether the imported goods under the first contract are used for the business (offshore supply contract).

Offshore Supply Contract:

If the imported spares are used in supplying goods offshore as per the contract, the IGST paid can be claimed as ITC.

Cross-Utilization of ITC Between Contracts:

ITC on IGST under the offshore supply contract cannot be denied simply because there is a second civil contract.

However, ITC can only be claimed on inputs/services related to business activity and must be properly accounted.

Conclusion:
Yes, the contractor can claim ITC on IGST paid on project imports under the offshore supply contract if these goods are used in the course or furtherance of business.

The existence of a second contract with the same firm does not disqualify ITC on project imports under the first contract.

Proper documentation and segregation of inputs related to each contract is advisable.

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