[Opinion] Understanding Input Tax Credit Under Ex-Works Contracts
- Blog|News|GST & Customs|
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- By Taxmann
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- Last Updated on 13 January, 2025
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Prateek Mitruka – [2025] 170 taxmann.com 279 (Article)
1. Introduction
The Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 241/35/2024 on December 31, 2024, clarifying the availability of Input Tax Credit (ITC) under Section 16(2)(b) of the CGST Act, 2017. This circular stems from concerns raised by the automobile sector about ITC eligibility in cases where goods are delivered under Ex-Works (EXW) contracts. Let’s delve into the circular’s details, its implications for taxpayers, and the broader GST compliance landscape.
2. Key Highlights of Circular No. 241/35/2024
2.1 Background of the Circular
The automobile sector raised queries about ITC eligibility under EXW contracts. Here, Original Equipment Manufacturers (OEMs) transfer goods to dealers at their own factory gate. The OEMs often arrange transportation and insurance on behalf of the dealer. Despite this, disputes arose over the ITC claim timing:
- OEMs’ Viewpoint: ITC should be claimable when goods are handed over to transporters at the factory gate.
- Tax Authorities’ Viewpoint: ITC should only be claimable when goods are physically received at the dealer’s business premises.
This conflict led to the issuance of the circular to ensure uniformity in interpreting Section 16(2)(b).
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