Q.67 under expansion project we have issued PO to the building contractor for construction of factory building. PO is on works contract basis. Can I take ITC on GST paid to the contractor

Ans. In accordance with the provisions under Section 17(5) of the CGST Act, 2017,

(c) 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;

(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation– For the purposes of clauses (c) and (d), the expression -construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

Therefore in both the cases I.e. input tax credit on construction services as well as works contract service are not allowed. Here, works contract service is not used for further supply of works contract services, hence credit shall not be allowed.