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Input credit on work contract services

CA DHIRAJ KADIA (Accounts & Finance Manager) (56 Points)

10 October 2020

Dear Sir , one of my client is providing industrial / Factory building construction services with material used in construction . He is a civil contractor He does not subcontracting I want to know that what is the rate of GST on output invoices and weather he can avail the input tax credit on material used ?

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2 Replies

Anshuman Basu (account -GST) (1549 Points)
Replied 10 October 2020

18% and he is not liable to take ITC.

Shivam RC (Student) (23683 Points)
Replied 11 October 2020

The Rate of GST for the Works Contract Services is 18% and the Contractor is also eligible to claim ITC on the materials purchased by him ( like Iron, Cement, Steel etc ). For the contractor, these materials are the inputs for the output service of works contract. It is being used in the course or furtherance of business.

As per the Provision of Section 16(1) of the CGST Act 2017, ITC on Inputs, Input Services and Capital Goods which are used in the course or furtherance of business can be claimed.

So the Contractor is eligible to claim ITC but the Recipient will not be able to claim ITC on GST paid for the Works Contract Services since it is specifically BLOCKED under Section 17(5) clause (c) of the CGST Act 2017.

Hope you understood Sir...

Regards,
Shivam RC.