13 October 2020
Suppose M/s SS Enterprises. is Civil and Electric Work Contractor Company. His main business is Work Contract Service provide to various Government and Corporate client. M/s SS Enterprises usally get order from Local Body as well as Corporate Sector, Building Developer etc.
Recently M/s SS Enterprises get order from a Corporate Client (M/s XYZ) who is Manufacture of Garments product for Construction, Renovation and Electrical Work of their office cum factory premises. Name of the Service is “Supply Erection, installation and Commissioning”
The Order Value is Rs 87Lakh/- including all like Materials, Service Charge, labor and GST. Please not all parties are in same state in West Bengal
For Complete the work(Construction, Renovation and Electrical Work -order by M/s XYZ ) M/s SS Enterprises purchase Bricks, Electrical Fitting like Lamp, Wire, Cement, Sand TMT Bar, Ware Rope etc as a raw material.
M/s SS Enterprises not appoint any sub contractor for finished work.
Now the question is :
1/ ls M/s SS Enterprises can claim ITC for those purchases? And what is the restriction of section 17(5)?
2/ How M/s SS Enterprises make Bill? I want to know what is the Taxable value and What is GST amount?
3/-What is the Tax treatment and ITC claim in A/c of M/s XYZ. 4/ Please tell me what is the rate of tax for electrical contractor who Supply Goods & Services to Govt (Govt Works). How to calculate the tax amount. And is ITC available on Purchases?
13 October 2020
1. SSE can claim the ITC. 2. SSE will raise the tax invoice according to the terms of contract- Mile stone billing or receipt of advance which ever is earlier.Taxable value will be as per contract and tax rate will be 18%. 3. XYZ can capitalise the GST amount.No ITC available. 4. On some type of Govt. contracts concessional rate is available.It depends on the nature of the works.
13 October 2020
Thank you for your early reply Please solve my doubt regarding my Two Question My question No 1 : Sir as per our local CA / Expert/ lawyer said “as per Section 17(5)(c) of CGST Act 2017 input tax credit in respect of work contract services has been restricted. ITC for works contract can be availed only by one who is in the same line of business and is using such services received for further supply of works contract service”. My question No 3 : If any work contract services has been used by recipient which has not been capitalized by the recipient for the said immovable property credit of the same may be availed by the recipient subject to other conditions
13 October 2020
Thank you for your early reply Please solve my doubt regarding my Two Question My question No 1 : Sir as per our local CA / Expert/ lawyer said “as per Section 17(5)(c) of CGST Act 2017 input tax credit in respect of work contract services has been restricted. ITC for works contract can be availed only by one who is in the same line of business and is using such services received for further supply of works contract service”. My question No 3 : If any work contract services has been used by recipient which has not been capitalized by the recipient for the said immovable property credit of the same may be availed by the recipient subject to other conditions
13 October 2020
1. With due respect to your CA, I reproduce section 17(5)(c) below- (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; So what is not available is ITC of Works Contract Service used for construction of immovable property. So the restriction is not for works contractor but on the works contract service supplied that means to the recipient of works contract service. But if the recipient of works contract service is another works contractor then the restriction is not there. 2. Answer to your question is covered by explanation to clause (d) of section 17(5) which reads as- Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property; Clause (d) says- 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. So this subsection is applicable if the inputs/input services are received the recipient on his own account. In the given case, this clause will not be applicable because the credit of works contract service received by XYZ (even if XYZ does not capitalise) is specifically blocked under clause (c). Hope the matter is clear now.
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