Page 11 - Chap7 ITC

Answer:

1. ITC on Works Contract (Section 17(5)(c))
Ü ITC is allowed for works contract services used to construct plant & machinery.
Conclusion: MBF Ltd. can claim ITC as the expenditure is for plant & machinery and not an immovable
property.

2. ITC on Construction Services (Section 17(5)(d))
Ü ITC is blocked if the construction is for the taxpayer’s own immovable property.
Ü ITC is allowed if the construction is for someone else.
Conclusion: Shah & Constructions can claim ITC since the construction is for another party, not for itself.

3. ITC on Vehicle Repairs & Maintenance (Section 17(5)(ab))
Ü No ITC for repairs & maintenance of vehicles where ITC is already blocked under Section 17(5)(a).
Ü ITC is allowed if the vehicle is used for transportation of goods.
Conclusion: ABC Ltd. can claim ITC on truck maintenance as the truck is used for transporting finished
goods.

Quick Revision Points :
• Works contract ITC: Allowed for plant & machinery.
• Construction ITC: Allowed for third-party construction, blocked for own property.
• Vehicle ITC: Allowed for goods transport, blocked for restricted vehicles

M/s XYZ, a registered supplier, supplies the following goods and services for construction of buildings Q.14
and complexes -
Ü excavators for required period at a per hour rate
Ü manpower for operation of the excavators at a per day rate
Ü Soil-testing and seismic evaluation at a per sample rate.
The excavators are invariably hired out along with operators. Similarly, excavator operators are supplied
only when the excavator is hired out.
M/s XYZ receives the following services:
Ü Annual maintenance services for excavators;
Ü Health insurance for operators of the excavators;
Ü Scientific and technical consultancy for soil testing and seismic evaluation.
For a given month, the receipts (exclusive of GST) of M/s XYZ are as follows:

Ü Hire charges for excavators - ` 18,00,000
Ü Service charges for supply of manpower for operation of the excavator - ` 20,000
Ü Service charges for soil testing and seismic evaluation at three sites- ` 2,50,000
The GST paid during the said month on services received by M/s XYZ is as follows:
Ü Maintenance for excavators - ` 1,00,000
Ü health insurance for excavator operators - ` 11,000
Ü Scientific and technical consultancy for soil testing and seismic evaluation - ` 1,00,000
Compute the net GST payable by M/s XYZ for the given month.
Assume the rates of GST to be as under:
Hiring out of excavators – 12%
Supply of manpower services and soil-testing and seismic evaluation services – 18%
Note: - Opening balance of input tax credit of GST is nil. (CA Final MTP Apr 19) [Study Mat]

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