Works Contract_Contractor not having registered office in the other state in which construction contract received can raised bill to for work done in that state, Goods and Services Tax - GST

[JIGAR SHAH]

CASE:

Company A is engaged in carrying on construction activity in Ahmedabad and received construction contract in Goa from Company C .

As per Sub contract between company A and B, Sub contractor Company B will purchase goods in Goa and utilise the same for construction.

At the end of project Company B will raise bill for works contract to Company A, for goods purchase over there and utilized for construction over there.

(Note: Company A located in Ahmedabad, company B & company C located in Goa)

Issues:

Can the company A take Input credit of IGST from bill raised by company B (Sub-contractor)? Are there any issues if company B raised bill for material and service purchase and used in Goa to Company A in Ahmedabad?

And Also Issue is that Company A not having registered office in Goa, can it raise invoice to Company C for work done in Goa?

Posts / Replies

[Alkesh Jani]

Shri

Take registration as casual taxable person in GOA, and hope every thing gets clear.

[KASTURI SETHI]

Dear Jigar Shah Ji,

I agree with Sh Alkesh Jani Ji. But you have other options too. Registration as 'Casual Taxable Person' is one of the options. Pl note that it is optional and not mandatory. In this scenario, registration as a casual taxable person may not be useful for A. Further my views are as under :-

1. First of all go through the definitions of 'Place of business', "Location of supplier of service', 'Fixed establishment'

2. In terms of Section 22 (1) of CGST Act, registration is required only from where taxable supply is made' and NOT where taxable is made'.

3. A perusal of query indicates that A has no fixed establishment in Goa. A temporary place cannot be 'location of supplier of service'.

4. A can be covered under Section 2(15) of IGST Act under clause (a) and (d) of the definition of 'Location of supplier of service'.

5. A's Place of business can be in terms of Section 2(85) (b) of CGST Act read with definition of 'location of supplier of service'

6. Registration in other State (Goa) is required only at a place where supplier of service or goods has fixed establishment.

Q No.1 Can the company A take Input credit of IGST from bill raised by company B (Sub-contractor) ? Are there any issues if company B raised bill for material and service purchase and used in Goa to Company A in Ahmedabad?

Ans. ITC can be taken provided that conditions mentioned in Section 17(5) (c) &(d) are qualified for. No problem as C is A's customer.

Q. No.2 And Also Issue is that Company A not having registered office in Goa, can it raise invoice to Company C for work done in Goa ?

Ans. Yes. A can raise invoice in the name of C. C is A's customer.

Also go through the following :-

1. AAR, Karnataka's decision dated 31.3.20 reported as 2020 (36) GSTL 239 (AAR-GST Kar = 2020 (4) TMI 693 - AUTHORITY FOR ADVANCE RULING, KARNATAKA in the case of T & D Electricals.

2. Board's Flyer No.28 dated 1.1.18 Para No.6 under the Head-'Position under GST'

3. Tweet FAQ dated 26.6.17 (serial No.61).

If a huge amount of ITC of inputs and services is to be received in Goa, better option is to register in Goa.

Thus A has both options.

[JIGAR SHAH]

Thank You so much for prompt reply

[KASTURI SETHI]

Dear Jigar Shah ji,

It is not prompt reply. I consumed too much time to prepare reply.

[JIGAR SHAH]

Thank you for your support.

[ramachandra murthy]

In my opinion,

B is executing works contracts as a sub-contractor to A in the State of Goa. It is a supply of services relating to immovable property, otherwise it is not a case of works contract services as defined under the CGST Act. According to Section 12(3) (a) of IGST Act, the place of supply for the supply of services directly in relation to an immovable property is the location of the immovable property where it is located or intended to be located. Hence in this case the place of supply is Goa with regard to works executed by B. As the location of the supplier of services i.e. B is the State of Goa and also the place of supply is in Goa, in my opinion, B has to a Tax invoice to A by charging CGST and SGST of the State of Goa. In such case, when A is not registered in the State of Goa, he cannot claim the ITC relating to the tax charged by B in the Tax invoice. Hence it is better A is also registerd in the State of Goa, where the work is being executed to get the benefit of ITC.