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Query Answer
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I am enrolled in the state of Maharashtra under GST

I have obtained works contract of a pvt. Ltd. Co of Banglore (Head office in Banglore)

Place of works contract is in Andhra Pradesh

My Works began and I have purchased material of Rs.12.00 lacs in Andhra Pradesh and paid SGST & CGST

Please Guide me

1)      How to get maximum ITC

2)      Should I take New registration in Andhra Pradesh and If so what about earlier purchase of Rs 12.00 lacs

3)      Whether for purchase of material and goods I can give address of Maharashtra and ask selling parties to levy only IGST.

Reply

As per section 10(1)(b) of IGST Act, 2017,  where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person.

As per above section when works contractor (third person) who is located in Maharashtra and awarded a works contract in Andhra Pradesh and if such works contractor instructs a supplier of goods in that state to deliver specified goods to the construction site then it would be deemed that such goods have been received by the Works Contractor and the place of supply would be the principal place of business of such person i.e. Maharashtra, which would make it an IGST sale and would be chargeable to IGST.

Therefore, the works contractor in the above case should pay IGST on purchase of goods from Andhra Pradesh instead of CGST and SGST. And no need to take separate registration is required to be maintained in Andhra Pradesh.

Further works contractor can take the IGST credit for the materials billed to him by the supplier of goods and charge the IGST for labour supplied by him and discharge the net tax liability from Maharashtra itself without any registration being required in Andhra Pradesh.

IGST on construction service provided by contractor— 

As per section 7(3) of IGST Act, 2017, subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in two different states shall be treated as a supply of services in the course of inter-State. 

The Location of the Works Contractor shall remain to be the state where his principal place of business is registered (unless he has established his office/ establishment in the place where the services are supplied). And place of supply of service in case of works contract shall  be the location at which the immovable property is located or intend to be located.

As stated in the query, state in which works contractor is registered and the state of construction site are different, IGST will be applicable.

On the other hand if the works contractor is going to establish an office or establishment in a state where construction site is located, registration of GST in that state would become mandatory.

Further CGST and SGST will be applicable on inward and outward supplies, because now contractor has registered in the state where construction site is located.   

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