Abc firm has taken the civil contract work from railway and sub let the work on back to back method to another sub contractor .now purchases made by abc firm in his own name, but used by sub contractor in the same govt. Work. In this case how the material purchased by abc firm will be transfer to sub contractor and what is the tax position and itc for sub contractor.

Reply

As per SCHEDULE I of CGST Act, 2017, any supply between related party shall be considered as supply with or without consideration.

Therefore, the taxpayer cannot transfer stock without paying tax even if the stock is supposed to be transfer without consideration. However such tax is fully allowed as credit.

In the other case, input tax credit of material purchased will be available to the main contractor provided that the sub contractor is working merely as a labour.

Further, the main contractor is eligible to claim the credit on tax paid on SUB CONTRACT i.e. input service for further supply of works contract service.