The Hon’ble Tripura High Court in M/s. SR Constructions v. The Union of India and Ors. held that the assesses is entitled to take Input Tax Credit (“ITC”) on taxable work contract services availed for the supply of construction of an immovable property.
SUMMARY OF CASE LAW
- A petitioner, a construction company, challenged the legality and validity of an order passed by the Additional Commissioner (Appeals) related to the Input Tax Credit (ITC) under the CGST Act.
- The petitioner had a works contract agreement with M/s Hotel Polo Pvt. Ltd. to construct a hotel in Agartala, and they procured materials and services from sub-contractors for the project.
- The petitioner claimed ITC for the inward supply of goods and services used in the works contract service and filed returns and paid taxes accordingly.
- The respondents raised a demand against the petitioner under Section 74(1) of the CGST Act, stating that the ITC claimed for works contract services was in violation of Section 17(5) of the CGST Act.
- The petitioner argued that the observations in the impugned order were devoid of logic and that the demand notice did not specify the charges and statutory provisions for the proposed demand.
- The respondents argued that there was nothing unlawful in the adjudication order, and the appellate authority agreed with the findings of the lower authority.
RELEVANT PROVISION FOR THE CASE
Section 17(5)(c) of the CGST Act:
“(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:
…………………………
(c) 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.”
CONCLUSION BY COURT
- The court referred to Section 17 of the CGST Act, which deals with the apportionment of credit and blocked credits and concluded that the petitioner was entitled to claim ITC for the works contract services provided for the construction of the hotel.
- The writ petition was allowed and disposed of in favor of the petitioner.
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