ITC on inward supply of JCB, Road roller etc. would be admissible, as do not fall under works contract services as per Section 17(5)(c) and also used for the construction of an immovable property on a sub-contract basis.
Facts: M/s. Building Roads Infrastructure & Construction Private Limited (applicant) is an unregistered dealer expecting a contract for construction, erection, commissioning, widening of roads and completion of bridges for road transportation for use of general public. They act as a sub-contractor to the main contractor who was awarded contract by NHAI to construction, erection, commissioning, widening of roads and completion of bridges and NHAI 16 (old NH 5) in the State of Andhra Pradesh. The execution of work takes place only in Andhra Pradesh.
Issues Involved: What is the classification of the ‘works contract’ services pertaining to construction, erection, commissioning and completion of ‘Bridges and Roads’ provided by the applicant as a sub-contractor to the contractors who have been awarded the construction contract pertaining to construction/widening of roads by the Government Entities such as National Highway Authority of India?
(2) Clarification for rate of tax chargeable on the outward supplies i.e., on the RA bills raised on main contractor.
(3) Whether eligible to claim input tax credit on inward supply of the following goods, JCB, Road Roller, Grader, Hydra Crane, Transit Mixer, Generator, Excavator and Sensor Paver.
AAR Findings: The Classification of Works Contract service rendered by the applicant in construction/widening of Roads to NHAI and its rate of tax. The classification and rates applicable on supply of service are provided in the Serial No. 3 of Heading 9954 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 under construction services. Notification No. 11/2017 was further amended by Notification No. 20/2017-Central Tax (Rate), dated 22-8-2017 and new entries at Serial No. 3(iii), 3(iv), 3(v) and 3(vi) were inserted.
Serial No. 3(iv) of the Notification No. 11/2017 after amendment reads as;
“(iv) Composite supply of works contract as defined in Clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, – (a) a road, bridge, tunnel, or terminal for road transportation for use by general public.”
The GST Council in their 25th Meeting on 18-1-2018 has made recommendations at Item No. 12 as under;
“to reduce GST rate (from 18% to 12%) on the Works Contract Services (WCS) provided by sub-contractor to the main contractor providing WCS to Central Government; State Government, Union territory, a local authority, a Governmental Authority or a Government Entity, which attract GST of 12%. Likewise, WCS attracting 5% GST, their sub-contractor would also be liable to pay @ 5%.” National Highways Authority of India was set up by an act of the Parliament, NHAI Act, 1988, under the administrative control of the Ministry of Road Transport and Highways. It was set up as a central authority to develop, maintain and manage the National Highways entrusted to it by the Government of India.
Hence, the instant case is qualified to fit in the above category. Accordingly, the principal rate Notification No. 11/2017 was amended vide Notification No. 1/2018-Central Tax (Rate), dated 25-1-2018 to amend the entries at Serial No. 3 by inserting new entries at Serial No. 3(ix), 3(x), 3(xi) and 3(xii). The Composite Supply, of Works Contract services provided by a sub-contractor to the main contractor were dealt with in entries at Serial No. 3(ix) & 3(x) of the amended Notification No. 11/2017, dated 25-1-2018. But the entry at Serial No. 3(iv) was not clubbed in the newly created Serial Nos. 3(ix) and 3(x). Further, the said supply of service is excluded from the 18% tax rate entry newly enumerated at 3(xii) which reads as (xii) Construction services other than (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) and (xi) above.
Accordingly the supply of service rendered by the applicant falls under the Item 3(iv) of the amended provisions of the Notification No. 11/2017-Central Tax (Rate) and the Rate of Tax applicable is 12% (CGST 6% + SGST 6%).
(2) Eligibility of Input Tax Credit on JCB, Road Roller, Grader, Hydra Crane, Transit mixer, Generator, Excavator, Sensor Paver
whether the applicant is eligible to claim Input Tax Credit on the above listed items as per Section 16(1) which reads as follows;
“16.(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.”
The applicant is eligible to claim ITC with subject to the satisfaction of certain pre-requisite conditions mentioned in Section 16 (2) such as, being in possession of tax invoice, having actually received goods or services, tax being paid by the supplier, return being filed under Section 39, etc. In addition to the above, certain restrictions are imposed on availment of Input Tax Credit under Section 17(5) of CGST Act, 2017.
Section 17(5)(c) and (d) of the Act restricting certain credits, is read as under;
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“(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :-
(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.”
Under Section 17(5)(c), the restriction on claiming Input Tax Credit by a taxable person is applicable on the inward supply of works contract service unless it is an input service for further supply of works contract service. The restriction applies only if the works contract service is used for the construction of immovable property other than plant and machinery. Further, Clause (d) of Section 17(5) brings inputs and input services under the ambit of restriction when the recipient of supply is constructing the immovable property on his own account.
In the instant case, the applicant seeks clarification on the claim of input tax credit on inward supply of the following goods, JCB, Road Roller, Grader, Hydra Crane, Transit Mixer, Generator, Excavator and Sensor Paver. The inward supply of the above mentioned goods neither fall under works contract services as per Section 17(5)(c) and these goods received by the applicant are made use of for the construction of an immovable property, which is certainly not on his own account as per Section 17(5)(d). As a matter of fact, the applicant carries out construction not on his own account, but as a sub-contractor to the main contractor who was awarded contract by NHAI.
In light of the facts submitted by the applicant, thus it is clear that the clauses of blocked credits under Section 17(5)(c) & (d) are not applicable to the instant case and thus eligible for claiming Input Tax Credit subject to the requisite conditions as mentioned in the Section 16(2) of the CGST Act, 2017.
Held: In view of the above foregoing it is ruled as under.
- The service provided by the applicant falls under Serial No. 3(iv) of the Notification No. 11/2017 as amended from time to time.
- Clarification for rate of tax chargeable on the outward supplies i.e., on the RA bills raised on main contractor. The Rate of Tax applicable would be 12% (CGST 6% + SGST 6%).
- Input tax credit on inward supply of the following goods namely, JCB, Road Roller, Grader, Hydra Crane, Transit Mixer, Generator, Excavator and Sensor Paver would be admissible to the applicant.
To read the complete judgment 2021 Taxo.online 1415
