Notice to Revenue why credit on constructions, etc. not available to assessee under GST

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The Hon’ble HC, Punjab and Haryana in the matter of DLF Cyber City Developers Limited v. Union of India and Others [CWP-34660-2019 on November 28, 2019] issued notice noting that the Petitioner would be entitled to claim the Input Tax Credit (“ITC”) even if the time limit for the same has lapsed.

Facts/Issue:

DLF Cyber City Developers Limited (“the Petitioner”) challenged the constitutionality of Section 17(5)(c) & (d) of Central Goods and Service Tax Act, 2017 (“CGST Act”) which restricts ITC in respect of works-contract service and immovable property construction.

Further,  Section 16(4) of the CGST Act which lays down a specific time period for availment of credit. The Petitioner relied on the judgement of M/s Safari Retreats Private Limited and another vs Chief Commissioner of Central Goods & Service Tax and others (W.P.(C) No. 20463 of 2018).

Held:

The Hon’ble HC, Punjab and Haryana in CWP-34660-2019 on November 28, 2019 issued notice on issue of constitutionality of Section 17(5)(c) & (d) of CGST Act which restricts ITC in respect of works-contract service and immovable property construction. And limitation of time period for availment of credit in terms of Section 16(4) of the CGST Act.

And stated  that in case the petition is allowed, the Petitioner would be entitled to claim the ITC even if the time limit under Section 16(4) of the CGST Act for the same has lapsed.

Relevant provisions:

Section 16(4) of the CGST Act

“16. Eligibility and conditions for taking input tax credit.

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”

Section 17(5)(c) & (d) of CGST Act

“17. Apportionment of credit and blocked credits.

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: –

(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input 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 account 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 “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;”

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