Clarification on ITC availability on Goods delivered under Ex-Works Contract
GST Clarification has been issued on Clarification on ITC availability on Goods delivered under Ex-Works Contract.In the GST Council it has been proposed that to clarify the buyer is eligible to claim the Input Tax Credit on goods under Ex-Works Contract, provided all the condition of section 16 & 17 of CGST are met.
Automobile company and dealers have sought clarification regarding the eligibility of Input Tax Credit for goods purchased under Ex-Works Contract. In this contract ownership of vehicles transfers to the dealer at the factory gate of Original Equipment Manufacturer (OEM), once the vehicles are handed over. Now the dealer argued that receiving ownership at factory gate qualifies as receipt, while tax authorities argue that physical delievery to the dealer’s premises is necessary for considering such as received.
Purpose of issuing Clarification:
Dealer claim ITC of vehicle at the point of invoicing and handed over at OEM ‘s factory , even if the vehicles have not physically arrived at the dealer’s business premises. Some tax officers argued that ITC can only be claimed once the goods physically reach the dealer. To resolve this the clarification has been issued.
Clarification:
As per section 16(2)(b) of CGST Act,2017 states that ITC can be claimed only if the goods are received by the buyer.However, the law does not specify that goods must be received at a particular place like the dealer’s premises. In the Ex-works Contract when Manufacturer handed over the vehicles to transporter at factory gate , ownership transfers to the dealer. The Original Equipment Manufacturer may arrange transport or insurance on behalf of the dealer.The dealer is responsible for any loss during transit. Hence Dealer can claim the ITC when the goods are handed over to transporter at suppliers factory gate.Physical delivery to the buyer’s location is not required to claim the ITC.
