Set off of ITC on Construction Against Output tax of Rental Revenues

[MADHAV TULSYAN]

Hello

I came across a Case wherein A builder has multiple commercial properties. They earn Rental incomes from existing Commercial properties. They have undertaken construction of a new commercial property, which looking at the current market scenario will take time to sell. Hence they are not generating any output tax @ 12% on the property under construction. But while the construction is on going, plenty of inputs are being accumulated.

Can they then offset these 'Construction Input tax credits' against the Rental Output. The Project is Registered under RERA, which implies that the builder intends to sell the Project, but is unable to find Buyers at present.

If not, con u plz site any notification or section in this regard

AI Summary

Can Construction ITC Offset Rental Output Tax? Section 17(5) CGST Act Debate and Court Ruling Insights A builder with multiple commercial properties sought advice on whether construction input tax credits (ITC) could offset rental output tax, as the new property under construction isn't generating output tax. Responses varied: one stated ITC on construction cannot be used for rental services due to Section 17(5) of the CGST Act, 2017, while others argued ITC could be utilized if the property is sold before receiving a completion certificate. A court ruling suggested ITC should be allowed if GST is paid on rental income. The possibility of litigation and seeking an Advance Ruling was also discussed.