Subcontractor deduction under rule 8(5)(c)

Save Share

This query is : Resolved

parimala manisekar (Querist)

08 August 2022 whether tax paid by subcontractor under composition scheme can be availed as deduction under this rule8(5)(c)

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

11 July 2024 Under GST composition scheme, subcontractors who are opted under the scheme cannot avail input tax credit (ITC) on the tax paid on their inputs. This is a key condition of the composition scheme, where the benefit of ITC is forgone in exchange for a simpler compliance process.

Here’s a breakdown of the relevant rules:

1. **Composition Scheme Overview:**
- Under the composition scheme, eligible taxpayers pay tax at a fixed rate on their turnover and cannot collect tax from their customers.
- They are not eligible to claim input tax credit (ITC) on their purchases.

2. **Subcontractors and Composition Scheme:**
- Subcontractors providing taxable services or supplying goods can opt for the composition scheme if their aggregate turnover does not exceed the prescribed limit (₹1.5 crore for goods suppliers and ₹50 lakh for service providers).
- However, once they opt for the composition scheme, they cannot avail input tax credit on the GST paid on their purchases.

3. **Rule 8(5)(c) of CGST Rules:**
- Rule 8(5)(c) of the CGST Rules pertains to the conditions for availing input tax credit (ITC). It states that a person opting for composition scheme under section 10 of the CGST Act is not eligible for ITC.
- This rule applies uniformly to all taxpayers under the composition scheme, including subcontractors.

4. **Deduction Under Rule 8(5)(c):**
- Since subcontractors under the composition scheme do not have the option to avail ITC, they cannot claim any deduction of tax paid on their inputs.
- The purpose of the composition scheme is to simplify compliance for small businesses by offering them a fixed tax rate, but at the cost of ITC.

In conclusion, subcontractors who have opted for the composition scheme cannot avail tax paid on their inputs as a deduction under Rule 8(5)(c) of the CGST Rules. They are required to follow the conditions of the composition scheme, which exclude the possibility of claiming input tax credit.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now