241/35/2024-GST — Clarification on availability of input tax credit as per clause (b) of sub-section (2) of section 16 of the Central Goods and Services Tax Act, 2017 in respect of goods which have been delivered by the supplier at his place of business under Ex-Works Contract
Summary
Circular 241/35/2024-GST, issued by the CBIC, provides clarity on claiming Input Tax Credit (ITC) when goods are delivered by the supplier to their own place of business under an Ex-Works contract. Simply put, it clarifies that even though the buyer is responsible for picking up the goods from the supplier's premises in an Ex-Works arrangement, the buyer CAN still claim ITC. The circular focuses on Section 16(2)(b) of the CGST Act, which mandates that the buyer must have received the goods.
The circular addresses a common confusion: whether "receipt of goods" in Section 16(2)(b) requires physical possession to be taken by the buyer directly at the supplier's location. The CBIC clarifies that delivery to the buyer's location isn't necessary for ITC eligibility. As long as the buyer is the rightful owner of the goods and the other conditions for claiming ITC are met (valid invoice, payment to supplier, filing of returns, etc.), the ITC can be claimed. This applies even if the supplier delivers the goods to their own premises, and the buyer then takes possession from that location.
This clarification primarily affects businesses involved in Ex-Works contracts, both suppliers and buyers. Buyers, particularly, can breathe easier knowing they are eligible for ITC even if they pick up goods from the supplier's site. Businesses should review their current ITC practices under Ex-Works contracts to ensure compliance with this clarification. There are no explicit deadlines mentioned in the circular, but it's effective immediately from its issue date of December 31, 2024. Therefore, businesses should adjust their ITC claims going forward, taking this clarification into account.
Key Changes
| Change | Impact |
|---|---|
| Clarification on 'receipt' of goods under Ex-Works contracts for ITC eligibility. | Clarifies that the recipient is eligible for ITC even if goods are delivered by the supplier to the supplier's own place of business under an Ex-Works contract, provided all other conditions for availing ITC are met. |
| Focus on actual physical receipt and possession as the determining factor for ITC. | Emphasizes that physical receipt and possession of the goods by the recipient or their authorized representative is crucial for claiming ITC, regardless of where that receipt occurs. |
| Emphasis on the recipient arranging for transport and bearing associated risks after Ex-Works delivery. | Reiterates the inherent characteristic of Ex-Works contracts where the recipient is responsible for transportation and risks from the supplier's premises, further solidifying the grounds for ITC eligibility despite delivery at the supplier's location. |
| Confirmation that 'place of business' includes supplier's premises under Ex-Works for ITC purposes. | Implies that the supplier's premises can be considered a valid 'place' of receipt for ITC eligibility under Ex-Works contracts, preventing unnecessary disputes or denial of ITC based solely on the location of delivery. |