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

Input tax credit restrictions: dispute over using construction ITC against rental output pivots on capitalisation and completion status.
Whether ITC on goods or services used for construction of immovable property can be applied against GST on rental income is disputed. Section 17(5) excludes ITC where inputs are used for construction (other than plant and machinery) to the extent capitalised, and the treatment depends on capitalisation in books and on the timing of sale relative to completion/occupancy certificate. Views diverge on whether a single GST registration and common ITC pool permit set off, and a High Court decision reportedly allowed ITC when construction feeds directly into renting.