Q. 230 There are three layer of contract, ABC ltd company, A contractor, B is a sub-contractor. My assessee is the Subcontractor of rolling of gas pipe line in the city. Sub contractor is responsible for rolling of gas pipes in the streets and for giving the connections to customers. sub contractor will purchase pipes and adhesive in order to rolling the gas pipe line. Suppose sub contractor purchase pipes or other material required in for Rs.100000/- and pay 18000/- as gst to the shopkeeper. further he raised contract bill sayRs.200000/- and charge GST for Rs.36000/-. My query is weather he will claim ITC 18000- and pay balance i.e 36000-18000=18000 or itc falls under block credit u/s17(5), what are his other GST implications if he hired labour from any agency? tds and RCM provision applicable on him or not.

Ans. As per clause (c) of section 17(5), ITC on “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” is blocked. However, ITC on works contract service is available if used in providing the works contract service i.e. contractors who are undertaking construction for others. Further, please note that ITC is not available when the expenses are capitalised in the books of account. 

Q. 229 I have import of software and local sales import of software, is RCM applicable ?

Ans. Under IGST Act, section 2(11), “import of services” means the supply of any service, where–– (i) the supplier of service is located outside India; (ii) the recipient of service is located in India; and (iii) the place of supply of service is in India; As the above-mentioned services are assumed to be satisfied the definition of import of services then as per notification no. 10/2017- ITR, “any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient” is covered under reverse charge mechanism. Therefore, reverse charge mechanism will be applicable and IGST liability to be discharged.

Q. 228 With reference the abvoe subject request to clarify whether rcm is appliacble on loading and unloading charges ?

Ans. In terms of notification no. 13/2017- CTR, supply of services by a GTA and who is not paying tax rate of 6% in respect of transportation of goods by road is covered under reverse charge mechanism. In the above mentioned case, if the loading and unloading charges are a part of service provided by GTA, then only it would be covered under reverse charge mechanism else it would count under forward charge.