Guwahati: The Assam government’s decision to tighten scrutiny of Goods and Services Tax (GST) Input Tax Credit (ITC) claims by public works contractors has sparked a backlash from the construction sector, with contractors alleging that the new framework is aimed at boosting the state’s revenue and imposes arbitrary benchmarks that have no basis in the GST law.
The dispute stems from a June 25 meeting chaired by Commissioner of Taxes Jitu Doley, during which senior officials finalised department-wise indicative ITC utilisation ratios for government contracts and approved a mechanism to scrutinise contractors whose tax credit claims exceed prescribed levels. The meeting also decided that contractors found availing fake ITC or using bogus GST invoices could face blacklisting from future government works.
Representatives of contractors’ associations argued that the prescribed ratios effectively create administrative ceilings on ITC despite the GST law containing no such provision. They maintained that ITC entitlement depends on the nature of a project, procurement patterns and material consumption, making uniform utilisation benchmarks arbitrary and, in their view, “illegal”.
Contractors’ representatives further alleged that the exercise was intended to augment the state’s revenue at a time when the government has substantially increased expenditure on welfare schemes in recent years, particularly those targeted at women. They claimed the burden of mobilising additional revenue was now being shifted to contractors through stricter scrutiny of GST claims.
The government, however, has not linked the exercise to revenue mobilisation. According to the official minutes of the meeting, the objective is to identify non-genuine ITC claims and verify them against actual material consumption before initiating any action. The minutes also state that genuine claims will not attract proceedings.
Under the framework, the GST Department will identify contractors whose ITC utilisation exceeds the prescribed benchmark and refer the cases to the concerned departments for verification. If the claims are found to be genuine, no further action will be taken. However, unsupported claims could invite proceedings by both the Commissionerate of Taxes and the respective department.
The indicative ITC utilisation ratios vary across sectors. They include 70% for RCC building works, 30-40% for bituminous roads, 75% for steel bridges, 70% for RCC bridges, 60% for irrigation projects, 80% for power transmission and substation works, 70-80% for power generation projects, 30% for embankments and 70% for water supply schemes. The official minutes describe these ratios as broad indicators that may vary by 5-10% depending on project-specific factors and the composition of inputs.
The meeting also proposed empanelling authorised bitumen suppliers, with contractors executing road projects expected to procure bitumen only from approved vendors after verification by the Public Works Department (Roads) and the GST Department.
Contractors said they supported strict action against fake invoices and fraudulent ITC claims but argued that introducing administrative benchmarks for legitimate tax credits could lead to unnecessary disputes, higher compliance costs and delays in the execution of public works projects. They urged the government to withdraw the proposed benchmarks and instead rely on the provisions already available under the GST law to deal with fraudulent claims.