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.

AI Summary

Input tax credit on construction disallowed for self constructed immovable property; inventory classification may permit credit for builders.
Section 17(5) denies input tax credit for goods or services received for construction of immovable property on the taxpayer's own account, with "construction" including activities to the extent they are capitalised. Works contract services are separately treated under clause (c), which excludes ITC when used for construction except where they serve as inputs for further works contract supplies. Builders classifying under construction flats as inventory rather than capital assets may claim ITC because such costs are not capitalised.