2021 (1) TMI 499 - AAR - GST

Input tax credit (ITC) on the inward supply of works contract service - outward supply is also works contract service - Interpretation of section 17(5) (c) (d) of the GST Act - applicant submits that the said sub-section prohibits the recipient from claiming input tax credit on the inward supplies of the goods and services listed in the clauses - HELD THAT - The term supply includes both inward and outward supplies. If a person makes a supply, it refers to an outward supply. If the taxable person claims or is prohibited from claiming the input tax credit in respect of a supply, it refers to an inward supply. Each of the clauses of section 17(5) of the GST Act describes the supply of a class of goods or services. The input tax credit shall not be available in respect of any of the supplies listed under the clauses (a) to (i). In other words, a taxable person cannot claim the input tax credit in respect of these supplies. A taxable person can claim the input tax credit in respect of a supply only if he is a recipient of the said supply. The clauses (a) to (i) of section 17(5) of the GST Act, therefore, in the context of the sentence that constitutes the said sub-section, and in relation to the taxable person claiming an input tax credit, can only refer to inward supplies of the goods and services. Each of these clauses begins with a statement of the goods or services in respect of the inward supply of which the taxable person is prohibited from claiming the input tax credit. The rest of the clause describes the context and the conditions under which the prohibition applies and also mentions the exceptions if any. 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 - 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.

Summary

Issues:
1. Admissibility of the Application
2. Interpretation of Section 17(5) of the GST Act

Issue 1: Admissibility of the Application
The applicant sought an advance ruling on the eligibility to claim input tax credit on inward supplies for providing works contract service to the Kolkata Municipal Corporation. The application was admitted as the issues raised were not pending or decided elsewhere under the GST Act, and no objection was raised by the revenue officer.

Issue 2: Interpretation of Section 17(5) of the GST Act
The applicant argued that input tax credit on inward supplies for works contract service should be available if the outward supply is also works contract service, citing Section 17(5)(c) of the GST Act. The revenue officer contended that input tax credit is restricted for works contract services unless for further supply. The Authority analyzed the conflicting interpretations of Section 17(5) and clarified that the prohibition on claiming input tax credit applies to inward supplies used for construction of immovable property, not for outward supplies. Therefore, the applicant, supplying works contract service to the Kolkata Municipal Corporation, was deemed eligible to claim input tax credit on inward supplies for construction projects.

The ruling concluded that the applicant could claim input tax credit on goods and services used for works contract service to construct immovable property for the Kolkata Municipal Corporation. The decision is subject to provisions under Section 103 of the GST Act unless declared void under Section 104(1).