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Itc for works contractors

Vikas Sinha (Tax Consultant) (89 Points)

06 June 2018

If any works contractor purchased cement, bricks, steel bars for completion of construction of a building for which he got contract from a Company then will the GST paid while purchasing those raw material be available as ITC or NOT? if not then how should he charge bill to company for the work and avoid double taxation because in GST law it is stated that there is no ITC AVAILABLE FOR WORKS CONTRACTORS

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Pankaj Rawat (GST Practitioner) (55032 Points)
Replied 06 June 2018

💯 ITC is available to work contractor .
The company cannot avail ITC on your services

Vinod Babu (24191 Points)
Replied 06 June 2018

As per section 17(5) (c) of the CGST Act, 2017, input tax credit shall not be available in respect of the 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.

Thus, 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. For example a building developer may engage services of a sub-contractor for certain portion of the whole work. The sub-contractor will charge GST in the tax invoice raised on the main contractor. The main contractor will be entitled to take ITC on the tax invoice raised by his sub-contractor as his output is works contract service. However if the main contractor provides works contract service (other than for plant and machinery) to a company say in the IT business, the ITC of GST paid on the invoice raised by the works contractor will not be available to the IT Company

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