The West Bengal Authority of Advance Ruling (AAR) ruled that Input Tax Credit (ITC) can be claimed on works contract service to Municipal Corporation.
The applicant, Sital Kumar Poddar is stated to be supplying works contract service to Kolkata Municipal Corporation to construct buildings for various projects.
The applicant has sought the advance ruling on whether he is eligible to claim the input tax credit on the inward supplies of the goods and services procured for supplying the works contract service. An advance ruling is admissible on this question under section 97(2)(d) of the GST Act.
The applicant submits that the prohibition under section 17(5)(c) of the GST Act applies to the input tax credit on the inward supply of works contract service for the construction of immovable property other than plant and machinery. However, the input tax credit on the inward supply of works contract service shall be available if the outward supply is also works contract service.
The coram of Susmita Bhattacharya and Parthsarthi Dey clarified that clause (c) of section 17(5) of the GST Act should be interpreted as a prohibition on a taxable person from claiming input tax credit on the inward supply of works contract service unless it is an input service for further supply of works contract service. The prohibition applies only if the works contract service is used for the construction of immovable property other than plant and machinery. The clause (d) of section 17(5) of the GST Act extends the prohibition to cover other inputs and input services when the recipient is constructing the immovable property on his own account.
“The applicant is supplying works contract service to the Kolkata Municipal Corporation. He is, therefore, making an outward supply of works contract service and is not prohibited from claiming input tax credit either under clause (c) or clause (d) of section 17(5) of the GST Act,” the AAR ruled.
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