Page 29 - GSTL_16th July 2020_Vol. 38_Part 3

2020 ] BLOCKED CREDITS IN RESPECT OF WORKS CONTRACT SERVICES UNDER GST LAW J71
High Court then it will be beneficial to the assessees who have availed input tax
credits otherwise they may have to reverse input tax credits and there is no ques-
tion of liability of penalty as long as they have not utilized ITC from the credit
ledger towards payment of tax against outward taxable supplies. The only risk
they would be taking is that a liability of interest under Section 50(3) of the CGST
Act, 2017 may arise.
Alternative thought to avail ITC
For detail analysis and better understanding of the sub-sections (5)(c)(d)
of Section 17, the term ‘works contract’ have to be analyzed in macro sense. Sec-
tion 2(119) of the CGST Act, 2017 defines the term ‘works contract’ as under :
“2(119) “works contract” means a contract for building, construction, fabri-
cation, completion, erection, installation, fitting out, improvement, modifica-
tion, repair, maintenance, renovation, alteration or commissioning of any
immovable property wherein transfer of property in goods (whether as goods
or in some other form) is involved in the execution of such contract;”
A plain reading of the cited definition of ‘works contract’ it is crystal clear that the
‘works contract’ comprises about 14 types of transactions and the activity involv-
ing ‘construction’ is just one amongst them. With Section 17(5) completely ready to
deny ITC of GST paid on goods or services used for the construction of immovable
property (other than plant and machinery) but there is no bar on ITC availment in
respect of certain types of post construction transactions activities undertaken by
works contract.
Hence, Section 17(5)(c) & (d) is disallowed ITC on goods or services, such
as construction materials, input services and capital goods by which an immova-
ble property comes to an existence. Thus, ITC on works contract services used for
fitting out furniture, indoor as well as outdoor decorating activities and other
activities such as air-condition, electrical fittings, sanitary items, wooden fittings,
elevators and lifts, DG sets, painting and polishing are post construction activi-
ties to an immovable property cannot be any bar in taking ITC on these post con-
struction activities. It is advisable that the owner of buildings to enter into sepa-
rate contract for construction of main building and entered into another contract
for post construction activities. In case of post construction expenses house own-
er of an immovable property is required to maintain books of account as capital-
ised expenditure for purchases of post construction activities to satisfy the condi-
tion of Section 16(3) of the CGST Act, 2017 so that ITC is very much available to a
registered person. Thus, the transaction of expenditure towards post construc-
tion activities like furniture & fittings, reconstruction, renovation, additions, al-
terations or repairs if capitalized in books of account, ITC cannot be denied to a
registered person.
Case Laws :
(1) The Authority for Advance Ruling, Karnataka, in the case of Wework
India Management Private Limited, reported in 2020 (32) G.S.T.L. 63
(A.A.R. - GST - Kar.), held that “Wooden flooring can be removed
and replaced without affecting the office space - No permanence in-
volved in this fastening nor any damage is done to the property, ei-
ther to the building or to the wooden flooring at time of detachment
- Cannot be covered under addition or alterations to immovable
property in strict sense and not to be covered under “construction
of immovable property” - Input tax credit relating to detachable 14

GST LAW TIMES  16th July 2020  29