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.

[DR.MARIAPPAN GOVINDARAJAN]

What is the contention of the department for reversal?

[HariKishan Bhonagiri]

Logically may be correct but there is no legal bar on claiming of that ITC.

AI Summary

Input tax credit reversal for builders: challenge to reclaiming service-tax credit used to pay GST on rental income.
Whether builders may retain and utilise input tax credit from service tax paid during construction where some units were sold after project completion and unsold units are let out with GST paid; the assessee reversed ITC for post-completion sales, used remaining credit to pay GST on rentals, and the department seeks reversal of the entire credit from project completion to reversal date, while commentators queried the department's rationale and noted no clear legal bar to claiming the ITC.