Save Rs 588 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

Input credit on work contract services

383 views

Save Share

CA DHIRAJ KADIA

Accounts & Finance Manager

49 Points Posted on 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 ?

Replies (2)

Quick Summary

This discussion clarifies the Goods and Services Tax (GST) implications for civil contractors providing industrial building construction services. The GST rate on output invoices for works contract services is 18%. Crucially, contractors are eligible to claim input tax credit (ITC) on materials like cement, steel, and iron used in the construction, as these are inputs for their business. However, the recipient of these services cannot claim ITC due to specific blocking provisions in the CGST Act.

Anshuman Basu

account -GST

1181 Points Posted on 10 October 2020

18% and he is not liable to take ITC.

Shivam RC

Student

7666 Points Posted on 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.