{"id":2980,"date":"2025-03-05T14:09:01","date_gmt":"2025-03-05T08:39:01","guid":{"rendered":"https:\/\/centaxblogs.taxmann.com\/?p=2980"},"modified":"2025-03-14T14:05:57","modified_gmt":"2025-03-14T08:35:57","slug":"cbic-clarification-on-itc-availment-for-ex-works-contracts-under-gst","status":"publish","type":"post","link":"https:\/\/www.centaxonline.com\/blog\/cbic-clarification-on-itc-availment-for-ex-works-contracts-under-gst","title":{"rendered":"CBIC Clarification on ITC Availment for Ex-Works Contracts Under GST"},"content":{"rendered":"
Input Tax Credit (ITC) on Ex-Works Contracts<\/strong> refers to the eligibility and applicability of ITC on goods or services purchased under an Ex-Works (EXW) contract within the Goods and Services Tax (GST) framework.<\/pre>\n
Table of Contents<\/strong><\/p>\n
    \n
  1. Background<\/a><\/li>\n
  2. CBIC Clarification<\/a><\/li>\n<\/ol>\n
    1. Background<\/h2>\n
    It has been observed that in the automobile sector, contracts between automobile dealers and Original Equipment Manufacturers (OEMs) are typically structured as Ex-Works (\u2018EXW\u2019) contracts. Under the terms of such contracts, ownership of the goods (i.e., vehicles) is transferred to the dealer at the OEM\u2019s factory gate when the goods are handed over to the transporter at the dealer\u2019s request, thereby completing the OEM\u2019s delivery obligations at the factory gate.<\/p>\n
    The transportation may be arranged by the OEM on behalf of the dealer, and if insurance is procured, it is also arranged for the dealer\u2019s benefit. In the event of loss, any insurance claims must be lodged by the dealer. Additionally, the dealer duly records the invoice in his books of accounts upon the delivery of vehicles at the OEM\u2019s factory gate.<\/p>\n
    The dealer claims Input Tax Credit (ITC) on the date the vehicles are invoiced and handed over to the transporter by the OEM at the factory gate. However, certain field formations have taken the position that ITC can only be availed by the dealer once the vehicles are physically received at his GST-registered place of business.<\/p>\n
    \"R.K.<\/a><\/p>\n
    2. CBIC Clarification<\/h2>\n
    Pursuant to the recommendations of the 55th GST Council meeting, the Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 241\/35\/2024- GST<\/a>, dated 31-12-2024, providing clarification on the timing of availing Input Tax Credit (ITC) for supplies made under Ex-Works contracts.<\/p>\n
    To ensure uniformity in the implementation of legal provisions, the CBIC has clarified that the delivery of goods to the recipient or any person acting on behalf of the recipient at the supplier\u2019s factory gate shall be deemed as \u2018receipt of goods\u2019 by the recipient for the purpose of claiming ITC.<\/p>\n
    Sub-section (2) of Section 16 of the CGST Act operates as a non-obstante clause to Section 16, outlining the conditions under which a registered person is ineligible to claim ITC on the supply of goods or services. Clause (b) of this provision stipulates that no registered person shall be entitled to ITC unless the goods or services have been \u2018received\u2019 by him.<\/p>\n
    The explanation appended to the said clause stipulates that a registered person shall be deemed to have \u2018received\u2019 the goods in the following circumstances:<\/p>\n