Recipients can Claim ITC on Ex-Works Contracts: GST Council
An Ex-Works (EXW) contract defines the responsibilities of buyers and sellers in the transportation of goods
The 55th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, introduced a crucial clarification regarding the eligibility of Input Tax Credit ( ITC ) in Ex-Works contracts. This clarification directly addresses concerns about ITC claims where goods are delivered at the supplier's place of business rather than at the recipient's location. An Ex Works (EXW) contract is...
The 55th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, introduced a crucial clarification regarding the eligibility of Input Tax Credit ( ITC ) in Ex-Works contracts. This clarification directly addresses concerns about ITC claims where goods are delivered at the supplier's place of business rather than at the recipient's location.
An Ex Works (EXW) contract is a trade arrangement where the responsibility of the seller ends once the goods are made available at their premises or another specified location. The buyer bears all costs, risks, and responsibilities from there, including transportation, insurance, and compliance with regulations like GST.
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Regarding GST, under an EXW contract, the seller is liable to charge and collect GST on the value of the goods supplied. The buyer, as the transporter or logistics provider, must ensure compliance with GST regulations, including the generation of an e-way bill if applicable, during the movement of goods.
Under the new guidance, the Council affirmed that in an Ex-Works contract, goods delivered by the supplier to the recipient or a transporter at the business premises of the supplier are to be considered "received" by the recipient as per Section 16(2)(b) of the CGST Act, 2017.
Consequently, recipients have the liberty to claim ITC on such goods, provided all other conditions outlined in Sections 16 and 17 of the CGST Act, 2017, are met.
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This recommendation resolves long-standing ambiguities about the physical delivery of goods versus the transfer of property. By establishing that the transfer of ownership at the location of the supplier, the recommendation by the Council satisfies the "receipt" condition while simplifying compliance and aligns tax practices with industry norms.
Experts view this move as a significant step in streamlining GST processes and eliminating potential disputes between taxpayers and authorities. By clarifying ITC eligibility for Ex-Works contracts, the Council aims to ensure seamless trade and reduce compliance burdens for businesses.
Other dignitaries in attendance during the 55th iteration of the GST Council Meeting, was Union Minister of State for Finance Shri Pankaj Chaudhary, Revenue Secretary Ajay Seth and Chief Ministers and Deputy Chief Ministers from several states.
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