Quick Summary
The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 241/35/2024-GST dated December 31, 2024, addressing input tax credit (ITC) eligibility under clause (b) of sub-section (2) of Section 16 of the Central Goods and Services Tax (CGST) Act, 2017. The clarification pertains to goods delivered by the supplier at their business premises under Ex-Works (EXW) contracts, a common practice in the automobile and other industries. Reference has been received from automobile sect
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FAQ :
The CBIC has clarified that for goods delivered under Ex-Works (EXW) contracts, Input Tax Credit (ITC) is considered eligible when the goods are handed over to the transporter at the supplier's premises, not necessarily upon physical receipt by the buyer.
This clarification pertains to clause (b) of sub-section (2) of Section 16 of the Central Goods and Services Tax (CGST) Act, 2017, which deals with the condition of 'receiving' goods for ITC eligibility.
In an EXW contract, the property in goods is considered to pass to the dealer at the factory gate of the Original Equipment Manufacturer (OEM) when the goods are handed over to the transporter at the dealer's instance.
No, the CBIC clarifies that for EXW contracts, the buyer is deemed to have 'received' the goods for ITC purposes when they are handed over to the transporter at the supplier's factory gate, as per the Explanation to clause (b) of sub-section (2) of section 16 of the CGST Act.
Yes, in addition to the 'receipt' condition clarified, the registered person must also fulfil other conditions under sections 16 and 17 of the CGST Act, including that the goods are used or intended to be used in the course or furtherance of business.
If goods are diverted for non-business purposes at any stage, the registered person will not be entitled to input tax credit on such goods as per sub-section (1) of section 16 of the CGST Act.
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