This circular provides clarification on the availability of input tax credit (ITC) under clause (b) of sub-section (2) of section 16 of the CGST Act, 2017 in cases where goods are delivered by the supplier at his place of business under Ex-Works (EXW) contracts, such as between automobile manufacturers (OEMs) and dealers.

It clarifies that there is no requirement for physical receipt of goods at the recipient’s premises for availing ITC. As per the Explanation to section 16(2)(b), when goods are handed over by the supplier to a transporter on the direction of the recipient, the recipient is deemed to have “received” those goods. Therefore, in EXW arrangements, the dealer is considered to have received the goods when the OEM hands them over to the transporter at the factory gate for onward delivery.

This deemed receipt principle applies to all EXW contracts where ownership transfers upon delivery to the transporter. However, ITC is admissible only if the goods are used in the course or furtherance of business. If the goods are diverted for non-business purposes, lost, destroyed, or given away as free samples, ITC shall not be allowed.