Commercial civil work related

You're dealing with a classic and complex GST treatment situation involving commercial construction (civil) contracts. Let's break it down into parts to help clarify:

🔍 1. Nature of the Contract

From your descripttion:

The contractor is supplying goods (materials) like cement, steel, electricals, etc.
Also supplying services like labor, fabrication, electrification.
Entire contract is for commercial construction.
Invoice is raised with GST @ 18% as per SOR (Schedule of Rates).

📌 Conclusion:
This is a Works Contract as defined under Section 2(119) of the CGST Act:

Works Contract means a contract for building, construction, fabrication, completion, erection, installation, etc. of immovable property, involving the transfer of property in goods (whether as goods or in some other form).

So, it's not pure service, nor a mixed supply. It is a composite supply, with the principal supply being construction service, hence qualifies as a Works Contract.

✅ 2. GST Treatment & Rate

GST rate on commercial works contracts is generally 18% (unless it involves government, affordable housing, etc.).
So, the contractor charging 18% GST is correct.

🚫 3. ITC Eligibility – The Key Issue

This is where restrictions come into play.

🔴 As per Section 17(5)(c) & (d) of CGST Act:

ITC is not allowed for:

“Works contract services” when supplied for construction of an immovable property (other than plant and machinery), except when used for providing further supply of works contract services.

🧾 In Simple Terms:

Scenario	ITC Allowed?
Contractor executing commercial civil work for a client	✅ Yes, contractor can claim ITC
Client (business entity) constructing commercial building for own use (like office)	❌ No ITC, blocked u/s 17(5)
Contractor providing further supply of works contract services	✅ Yes
Construction of plant & machinery	✅ Yes, ITC allowed

🎯 Apply to Your Case

Party	Role	ITC Allowed?	Remarks
Contractor	Providing works contract (materials + services)	✅ Yes	He is in business of supplying works contracts
Client (who is getting commercial building constructed)	Using building for own office, showroom etc.	❌ No	ITC blocked under Section 17(5)(d)
If client will rent out the property (output taxable supply)	✅ Possible	If construction is for further taxable supply (like renting with GST), ITC may be allowed

📌 Summary

Question	Answer
Is it a works contract?	✅ Yes
Can contractor claim ITC on material & labour?	✅ Yes
Can client (recipient) claim ITC?	❌ No – if immovable property for own use
GST rate 18% correct?	✅ Yes – for commercial construction

✅ Recommendations

Check the end use of the constructed property:
- If for own use → no ITC
- If for taxable renting/leasing → ITC may be allowed
Contractor should maintain proper SOR, purchase invoices, and labour records for ITC claims.