Blocked Input Tax Credit on commercial building construction remains unavailable despite rental use and output GST

Input Tax Credit on goods and services used to construct an immovable commercial building is blocked under Section 17(5)(d) of the CGST Act, even if the building is intended to be let out and output GST is charged on the rental supply. Credit under Section 16(1) remains subject to the restriction in Section 17(5), and construction of an immovable property on own account falls within the blocked-credit rule. The building was treated as outside the scope of plant and machinery, and the retrospective substitution of "plant or machinery" with "plant and machinery" removed any basis for treating the construction as an exception.

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Issues: Whether Input Tax Credit is admissible on goods and services used for construction of a commercial building intended to be let out on rental basis and on which output GST is charged.

Analysis: The entitlement to Input Tax Credit under Section 16(1) of the Central Goods and Services Tax Act, 2017 is subject to the restrictions in Section 17(5). Clause (d) of Section 17(5) blocks credit on goods or services received for construction of an immovable property on own account, including when used in the course or furtherance of business. The building constructed by the applicant is an immovable property and, as a mall or commercial building, falls outside the ambit of plant and machinery. The retrospective substitution of the words "plant or machinery" with "plant and machinery" in Section 17(5)(d) removes the scope for treating such construction as an exception to the blocked-credit provision. Accordingly, the construction expenditure remains within the blocked credit rule even though the property is intended to be rented and output tax is charged on the rental supply.

Conclusion: Input Tax Credit on goods and services used for construction of the immovable property is not admissible and the answer is against the applicant.

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