Page 27 - GSTL_16th July 2020_Vol. 38_Part 3

2020 ] BLOCKED CREDITS IN RESPECT OF WORKS CONTRACT SERVICES UNDER GST LAW J69

BLOCKED CREDITS IN RESPECT OF WORKS CONTRACT SERVICES UNDER GST LAW
BLOCKED CREDITS IN RESPECT OF
WORKS CONTRACT SERVICES UNDER
GST LAW — AN ANALYSIS
BLOCKED CREDITS IN RESPECT OF WORKS CONTRACT SERVICES UNDER GST LAW
By
Ramesh Chandra Jena, B.A. (Hons.), M.A. (Eco.),
D.M.M., LL.B.
ADVOCATE & TAX CONSULTANT

Section 17 of CGST Act, 2017 prescribes appor-
tionment of credit and blocking of credits under GST
Law. A registered person is not entitled to avail full Input Tax Credit against
goods or services received by him under tax invoices, even if input tax credit has
been duly credited to his credit ledger but part of input tax credit has to be re-
versed from his credit ledger.
Where goods or services or both used by the registered person partly for
purposes of any business and partly for other purposes/partly for taxable sup-
plies including zero-rated supplies and partly effecting exempted supplies, the
ITC shall be reversed against goods or services used for other purpos-
es/exempted supplies and this reversal of credit is known as apportionment of
credit in terms of sub-sections (1), (2), (3) & (4) of Section 17 of CGST Act, 2017.
Sub-section (5) of Section 17 of the CGST Act prescribed certain provi-
sions by which Input Tax Credit shall not be available to a registered person
against supply of goods or services received by a registered person and this re-
striction is known as “Blocked credits”. Section 17(5)(c)(d) of the CGST Act, pre-
scribes provision of blocked credits in respect of works contract services. The
relevant provision of blocked credit in respect of “Works Contract Service” is
reproduced as under :-
“17(5)(c) works contract services when supplied for construction of an im-
movable property (other than plant and machinery) except where it is an in-
put service for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction
of an immovable property (other than plant or machinery) on his own ac-
count including when such goods or services or both are used in the course or
furtherance of business.”
Explanation. - For the purposes of clauses (c) and (d), the expression “con-
struction” includes re-construction, renovation, additions or alterations or re-
pairs, to the extent of capitalization, to the said immovable property.”
(6) …..
Explanation. - For the purposes of this Chapter and Chapter VI, the expression
“plant and machinery” means apparatus, equipment, and machinery fixed to
earth by foundation or structural support that are used for making outward
supply of goods or services or both and includes such foundation and struc-
tural supports but excludes -
(i) land, building or any other civil structures;
(ii) telecommunication towers; and

GST LAW TIMES  16th July 2020  27