# Blocked Credit — Works Contract & Self-Construction

ITC blocked on works-contract services or goods/services used by a person for construction of immovable property on his own account (office, warehouse, etc.).

```

Works contract / Goods & Services for self-construction

+------------------------+------------------------+

v v

Cost NOT capitalised Cost CAPITALISED

(charged to P&L) |

| +-------------------+------------------+

v v v

ITC ALLOWED For Plant & Machinery For other immovable property

| |

v v

ITC ALLOWED ITC BLOCKED

```

Additional exception: ITC is also allowed when works contract is used for further supply of works contract service (sub-contractor model).

---

## What is 'Plant and Machinery'?

Plant & Machinery = apparatus, equipment, machinery fixed to earth by foundation including the foundation/structure.

EXCLUDED from P&M (so ITC remains BLOCKED on these):

Land, building, other civil structures
Telecommunication towers
Pipelines laid outside the factory premises

Special inclusion: Ducts and manholes used for optical fibre cable network are treated as P&M — ITC ALLOWED (integral part of the network).

Worked example

### Example 1

Illustrative scenarios

Transaction	ITC Status	Reason
Cement and tiles for own office construction (capitalised)	Blocked	Capitalised + not P&M
Cement for foundation through which plant is fixed to land	Available	Foundation of P&M is part of P&M
Works contract for staff quarter / parking shed	Blocked	Capitalised civil structure
Works contract for pipeline from river to factory gate	Blocked	Pipeline outside factory excluded from P&M
Works contract for repair of building, charged to P&L	Available	Not capitalised
ABC Ltd. subcontracts construction to Ajay Constructions (ABC has main contract from Ron Associates)	Available to ABC Ltd.	Further supply of works contract service exception

⚠️ Common exam mistakes

Confusing 'foundation of plant' (allowed) with 'civil construction' (blocked) — the foundation that supports P&M is part of P&M.
Treating repair charged to P&L as blocked — capitalisation is the trigger, not the nature of expense.
Claiming ITC on pipelines outside the factory — they are specifically excluded from P&M.
Forgetting the sub-contractor exception: a works contractor receiving works-contract services for onward supply CAN claim ITC.
Treating telecom towers as P&M — they are specifically excluded; but optical fibre ducts/manholes ARE P&M (recent clarification).

Bare-Act text Section 17(5)(c), (d) and Explanation · CGST Act, 2017 · click to expand

Section 17(5): ITC shall not be available in respect of — (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation: 'construction' includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation. 'Plant and Machinery' means apparatus, equipment, and machinery fixed to earth by foundation/structural support used for making outward supply, including such foundation and structural supports but excludes (i) land, building or other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises.

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Blocked Credit - Works Contract & Self-Construction of Immovable Property [Section 17(5)(c)(d)]

Worked example

⚠️ Common exam mistakes