Delhi GST Department issues circular on ITC Rules for Ex-Works Contracts

The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular where it has given clarification regarding the availability of Input Tax Credit Rules for goods that have been delivered by the supplier at his place of business under an Ex-Works Contract.

The Delhi GST Department has decided that the Circular No. 241/35/2024 GST of Central Tax, dated 31st December 2024, is applicable mutatis mutandis. As per the circular, the Ex-Work contract in the case of the automobile sector is a contract between Original Equipment Manufacturers (OEMs) and the dealers, where the property in goods passes to the automobile dealer when the supplier hands over the goods to the transporter, arranged on behalf of the buyer and the delivery on the part of the OEM is complete at his factory gate. The transport and insurance are either arranged by the buyer or by the supplier on behalf of the buyer. In this contract, ITC can be claimed when goods are handed over to the transporter by the OEM at his factory gate.

As per the circular, in an EXW contract between the dealer and OEM, the OEM hands over goods to the transporter at the factory gate on behalf of the dealer, and the ownership of the goods shifts to the recipient at that point. Therefore, the recipient is considered to have “received” the goods under Section 16(2)(b) of the CGST Act.

Refer to the official circular for more information.