Credit allowability in case of Builders

[ROHIT GOEL]

One of our client (assessee company) is engaged in the activity of building and developing commercial complex. Out of shops constructed therein some shops were sold out while construction on which service tax has been paid in full and some were sold after date of project completion on which no service tax has been paid and remaining shops are held as inventory as of now. Credit of ITC availed has been reversed on such shops which were sold after date of completion.

Unsold shops have been let out on which GST has been paid. Remaining credit of service tax has been utilized for paying GST on rental value. Now department has asked to reverse the entire credit along with interest from the date of project completion to the date of reversal.

Is it correct as per law to reverse the entire credit on the date of project completion itself or we can utilise such credit for paying GST on rental value.

AI Summary

Company Challenges ITC Reversal Under GST for Sold and Rented Shops; Seeks Clarity on Legal Requirements A company involved in building and developing a commercial complex has faced an issue regarding the reversal of Input Tax Credit (ITC) under the Goods and Services Tax (GST) framework. Some shops were sold before project completion, with service tax fully paid, while others sold after completion had ITC reversed. Unsold shops are rented out with GST paid on rental income. The tax department demands the reversal of the entire ITC with interest from the project completion date. The query seeks clarity on whether the reversal is legally required or if ITC can be used for GST on rental income. Responses indicate no legal bar on claiming ITC.