Input tax credit on works contract

Apportionment of credit & blocked credits

I have a query regarding Input tax credit in case of Works contract.

A works contractor undertakes contract of electrical fittings for an immovable property. So whether he is eligible for input tax credit on the material used for the contract or whether it will be disallowed under section 17 clause 59(c) which states works contract services when supplied for construction of an immovable property (other than plant & machinery)except it is an input service for further supply of works contract service.

Kindly guide.

Regards,

Suraj

Replies (2)
yes he can take credit on his inputs

Revised Model GST Law mentions that input tax credit is not available for-

  • works contracts services when supplied for construction of immovable property, other than plant and machinery, except where it is an input service for further supply of works contract service
  • goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even when used in course or furtherance of business.

On analysis, one finds this provision is quite contradictory.

For example, any contractor/builder will not enjoy any input tax credit on the input services if he constructs any building. But he will enjoy input tax credit on input service for further supply of works contract service. These two sentences are confusing and contradictory.

Input tax credit is available to both a builder and a taxable person while constructing plant and machinery. But input tax credit is not available to any taxable person who constructs on his own account even if it is for business use.

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