GST ITC Available On Work Contract Services For The Construction Of Hotel Building: Tripura High Court

The Tripura High Court has held that in providing taxable work contract services for the said construction of a hotel building, the assessee is entitled to take an input tax credit on the goods and services being utilized for providing the taxable work contract services.

The bench of Acting Chief Justice Aparesh Kumar Singh and Justice Arindam Lodh has observed that the assessee has fulfilled all the conditions of work contracts as he is providing work contract services under a contract for the construction of a hotel in which the transfer of property in goods is involved in the execution of the contract. The Hotel Polo Pvt. Ltd. is an immovable property. The assessee has been providing work contract services to the owner of the hotel and not for its own.

The petitioner/assessee is a construction company. They have a works contract agreement with M/s Hotel Polo Pvt. Ltd. and have constructed a hotel at Agartala. In the process of construction, they procured materials and also used the services of subcontractors. For the purpose of providing inward output service under a work contract, the petitioner receives the inward supply of various goods and services on payment of GST. The returns were also filed, and the taxes were paid. So, in the process of paying taxes, he was entitled to an input tax credit, and amounts have been remitted by the assessee. But, in that process, the respondents have raised the input tax credit against the petitioner under Section 74(1) of the CGST Act. The demand on the ground that ITC availed of works contract service for the supply of construction of immovable property was in violation of Section 17(5) of the CGST Act and is incorrect. The respondents were not entitled to collect the taxes under the Input Tax Credit since the credit has to be given under the Income Tax Act.

A show cause notice was issued to the assessee. He has filed an explanation, and orders have been passed. Aggrieved thereby, the assessee has preferred an appeal before the respondent, by which the appellate authority confirmed the order dated October 13, 2020, passed by the adjudicating authority.

A demand notice cannot be confirmed to the assessee without specifying the charges and notifying the exact statutory provisions based on which the demand is proposed. The respondent denied the ITC amounting to Rs. 1,42,33,194, availed on works contract services for the construction of an immovable property, on the ground that such availment is in violation of 17(5)(c) of the CGST Act.

The court held that the petitioner did not fall within the definition of Section 17(5)(c) of the CGST Act, 2017. The demand raised on September 30, 2019, and the penalty imposed under Section 74(1) of the CGST Act, 2017 are ultra vires, contrary to law. Thus, the order dated February 1, 2022, passed by the respondent, the appellate authority affirming the order passed by the adjudicating authority, is liable to be set aside and quashed.

Case Title: M/S SR Constructions Vrs. The Union of India & Ors.

Case No.: WP (C) 399 OF 2022

Date: 04.04.2023

Counsel For Petitioner: T.K. Deb

Counsel For Respondent: R. Tangri

Click Here To Read The Order