Works Contract taxable at 12% with ITC for services provided by sub-contractor to contractor for NHAI

In Building Roads Infrastructure & Construction Pvt. Limited. [AAR No. 07/ AP/GST/2021 dated January 18, 2021], Building Roads Infrastructure & Construction Pvt. Limited (“the Applicant”) being a subcontractor sought a clarification on taxability of works contract services provided to contractor of National Highway Authority of India (“NHAI”) along with eligibility to claim Input Tax Credit (“ITC”) on inward supply of machines like Road Roller, Grader, Hydra Crane etc.

The Hon’ble Andhra Pradesh Authority of Advance Ruling (“AAR”) noted that supply of service by the Applicant falls under item 3(iv) under Heading 9954- “Construction Services” of the amended provisions of the Notification No.11/2017- Central Tax (Rate) dated June 28, 2017 (“Services Rate Notification”) followed with the tax rate being applicable at 12%

Observed, the inward supply the goods of the above mentioned goods neither fall under Section 17(5)(c) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) as it is in the nature of input service for further supply of works contract service nor under Section 17(5)(d) of the CGST Act because the same is certainly not on the Applicant’s own account but as a sub-contractor to a contractor of NHAI.

Therefore, the clauses of blocked credits under Section 17(5)(c) and (d) ibid are not applicable to the instant case and thus eligible for claiming ITC subject to the requisite conditions as mentioned in the Section 16(2) of the CGST Act.

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