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Understanding the Inward supplies on which input tax credit is not allowed such works contract services, goods and services on the construction of immovable property with the exceptions Motor Vehicles works contract and
immovable property are the items in the
second category of no double tax benefit
that need double clicking first one is
related to Motor Vehicles we seen that
Motor Vehicles and any other form of
conveyances the supplies of these on
which taxes are paid fall under negative
list no input tax credit can be paid on
access paid for purchase of Motor
Vehicles or any other mode of conveyance
except for for cases one where the
vehicle is used for further taxable
supply of such vehicles second where it
is used for transportation of passengers
third where it’s used for transportation
of goods and fourth for imparting
training like in driving school notice
that in all four cases the vehicle is
used in furtherance of business for a
particular business activity so if the L
is used in some constructive purpose
other than personal consumption you can
only think of personal consumption if
the vehicle does not fall in these four
categories and so all these four
categories add value and therefore the
exceptions are to achieve the underlying
principle of input tax credit the
incentivize value addition so those were
the exceptions relating from Mort
available next works contract remember
that the negative list includes works
contract only when it is supplied for
construction of a mobile property other
than plant and machinery before we let
in toward the exception over here is
let’s understand the meaning of works
contract works contract is an agreement
which is a mixture of goods as well as
services the person who is contracted to
provide works contract services would
provide services of first and in
addition there is transfer of title of
goods so he is providing goods
as well as services and that’s why it
Paulo works contract GST brings along a
huge relief in this particular area
under the current tax system worlds
contract is treated as both goods and
services bills have to be raised
separately for goods and services
documents have to be maintained
separately so that each item whether
it’s a good or services can be
identified and tax can be levied
accordingly there are huge headaches
involved in computing taxes for works
contract GST will do away with all these
complications because under GST works
contract is treated as service only
there is no goods element it is treated
just as any other service this news
makes our business man George feel like
he’s a superhero with super powers given
by zs
Oh George don’t celebrate so much
negative list includes works contract
when it is supplied for construction of
a mobile property other than plant and
machinery meaning that input tax credit
will not be available on these
particular works contract services but
there’s an exception of course there is
an exception to plant and machinery only
works contract for immovable property
other than plant and machinery though
input tax credit is not allowed in this
also there is an exception that if such
works contract for construction of a
mobile property is an input service that
is if a Works contractor provides these
services to another works contractor the
service receiver is also a Works
contractor then on such input service
input tax credit can be claimed
general negative list is for works
contract given for construction of a
mobile property other than plant and
machinery exception to this which makes
it a positive list is that if such works
contract is an input service for another
works contractor then on such input
service input tax credit will be allowed
let’s move on to the third in our list
which is immovable property on own
account construction of a mobile
property on own account what does this
mean goods and services which are
received by a taxable person here are
business George’s business of garment
store is a taxable person if da monster
sees these goods and services for
construction of immovable property for
its own use on his own account like
factory office building then so input
tax credit would not be allowed on goods
and services used for construction of a
mobile property on his own account even
if such a mobile property is used for
the furtherance of business remember is
immovable property excludes plant and
machinery as you can guess there’s been
a lot of lobbying against this provision
but for now it is your mistake let’s
recap the provisions relating the
immobile property works contract is
applicable on a broad category of a
mobile property whether on own account
or not
supplies for immovable property is for a
specific category where the construction
is only on own account in both these
cases plant and machinery is not
included so we would want to note two
definitions here one is of construction
the word construction would include
reconstruction renovation additions or
alteration or repairs to the extent that
would be capitalized in the books of
accounts to that particular immobile
property and second that we’ll need to
know is plant and machinery it means a
parentless equipment machinery pipelines
telecommunication tower fixed to earth
by foundation or structural support all
of these should be used for making
outwards supply an underlying principle
of IPC and all of these includes the
foundation and the structural support
for the telecommunication tower but it
does not include the land building or
any other civil structure
this connection