Availment of ITC

[Prudhvi Jakkula]

Dear experts,

I have some queries in sec 17(5).

Sec 17(5)(d) reads as below

goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

Here my doubt is, it is clearly said that credit relating to construction is immovable property is not eligible. Then why real estate people are claiming credit of ITC paid by them on flats sold before completion certificate.

But if immovable property is constructed for letting out purposes then the same ITC is not available for the business.

Please clarify this. (In recent judgement of high court it was said that credit on immovable property which was used for letting out can also be claimed) 2019 (5) TMI 1278 - ORISSA HIGH COURT

So i request the members to put forward some valid points regarding this.

[KASTURI SETHI]

Strings are attached to availment of ITC for construction of property. What are those strings you understand very well, since you are yourself expert. Regarding the decision of Orissa High Court mentioned by you, I am sure the department will not accept the judgment and file appeal/writ petition with the Supreme Court.

We are to go by the Act and not any decision of any court inasmuch as any judgement can be set aside by the higher court. So it is better to understand the language of the Act in our interest as well as our client's interest..

So I request you to do xray of Section 17 (5) of CGST before arriving at any decision. Nothing is out of reach for you.

[SHARAD ANADA]

Builder is providing works contract services to his customers. PL refer definition of works contract u/s 2(119) of CGST ACT 2017

(119) “works contract” means a contract for building, construction, fabrication,completion, erection, installation, fitting out, improvement, modification, repair,maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;

Sec 17(5) does not block credit of wc services used in providing works contract services. Refer sec 17(5)(c)

(c) works contract services when supplied for construction of an immovable property(other than plant and machinery) except where it is an input service for further supply of works contract service;

[KASTURI SETHI]

There is a world of difference between Construction Service and Works Contract Service.

[Prudhvi Jakkula]

Thank you sethi ji for your answer. But it is not good for anyone to mock others without any reason.

Anyways coming to the words of section, it is mentioned that credit is not available in case of construction of immovable property "on his own account". My main concern is whether that own account implies self purpose(means using as office) or any other meaning is there for that word

[KASTURI SETHI]

Dear Sh.Prudhvi Jakkula Ji,

It was not my intention to hurt your feelings. Really I have a great regard for your knowledge. I like your replies from the core of my heart.

[KASTURI SETHI]

It is not my temperament to scoff at others. I am an introvert person. All experts in this forum know my nature. I have been sharing my knowledge and experience in this forum since retirement. Still I do not consider myself perfect as learning is a lifelong process.I can learn from youngster.

[Himansu Sekhar]

Dear friend,

Hon'ble Court has specifically denied to make the respective clause of Section 17(5) Ultra vires. Kasturi Sir advises to go to the provisions of the Section. The provisions are clear.

[KASTURI SETHI]

Dear Sh.Himansu Sekhar Ji,

I agree with you completely. I have expressed department's bent of mind. The matter will travel to the Supreme Court, it being interpretational dispute.

Why have you stopped contributing to this forum ? I relish your views on any issue. It is not difficult to spare sometime for sharing your knowledge on this forum.

Thanks & regards,

K.L.SETHI

[Prudhvi Jakkula]

Dear sethi sir, I respect you very much.

Sorry if my words created inconvenience to you. Even your scoldings are considered as blessings. Such a knowledgeable person you are.

Any ways thank you again for clarifying that ITC issue.

[Nandan Khambete]

Dear All,

if you read Section 17(5) above again, Construction is to be considered only to the extent it is “capitalised”.

Flat/ Construction by Builders, it is not “capitalised” in their books. It is Inventory. Hence they can take ITC.

Hope the above is clear. Regards

[Prudhvi Jakkula]

Dear Nandan sir,

You hit directly to the bird's eye. Thank you for providing clarification.

[KASTURI SETHI]

Actually idiom is 'to hit bull's eye' and NOT 'bird's eye'.

[Prudhvi Jakkula]

Sethi ji thank you again for correcting me. ☺️☺️☺️☺️

[Himansu Sekhar]

Thank you Sethi sir, I shall continue sparing some time. My profile has also been disabled.

AI Summary

Discussion on ITC Eligibility Under Section 17(5) GST Act for Construction of Immovable Property Sparks Debate A forum participant raised a query about the availment of Input Tax Credit (ITC) under Section 17(5) of the GST Act, specifically concerning immovable property construction. The discussion involved clarifications on whether ITC can be claimed for properties constructed for business purposes or for sale before completion certificates are issued. Several experts, including KASTURI SETHI and SHARAD ANADA, contributed, highlighting the distinction between construction services and works contract services, and the interpretation of 'on his own account.' The debate referenced a recent Orissa High Court judgment, with participants suggesting that the matter might escalate to the Supreme Court for further clarification.