Credit of Renovation expenses done in a shop

[Pradeep Singhi]

Whether credit can be taken for renovation expenses done in a shop ?

[KASTURI SETHI]

Yes, if not capitalized. Show such expenses as revenue expenditure in your books of account.

[Atul Rathod]

1.Eligible as 17(5) restricts only credit to the extent of the capitalization to the said immovable property. In case of rented shop, there would not be capitalization of such expenses to any immovable property. (However this is aggressive view & could be litigated by department).

2. If it is not rented shop & its own, than eligible criteria would depend directly on capitalization or charging off to P&L.

If capitalized-Ineligible, & If charged to P&L-Eligible

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir .

[Alkesh Jani]

Dear Experts,

For sake of my knowledge, If expenses are made for capital goods, it should go into the capital expenses and only those relating to revenue will go to revenue account. (this is my understanding). Can we make such entries in book of account? is it permissible as per Accounting standards?

Thanks in advance

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

In a layman's language, short period of time expenditure are revenue expenditure and long-term expenditure are capital expenditure. Examples of both are easily available on various sites. In pre-GST era, Govt. allowed small expenses incurred up to 10,000/- in a purchase bill to be treated inputs for the purpose of cenvat credit (duty paid) instead of capital goods though the goods were classified as capital goods.We cannot treat revenue expenditure as capital expenditure and vice versa.

[Ganeshan Kalyani]

Well explained by Sri Kasturi Sir. The expense from which If the benefit is going to accrue for a longer period then it is capital expenditure. And if the benefit is for a shorter period then it is revenue expenditure. The depreciation benefit is not taking on the same. As the expenses are not capitalised in the block of asset.

AI Summary

Can GST Credit Be Claimed for Shop Renovation? Eligibility Depends on Capitalization and Expense Reporting Practices. A query was raised about whether Goods and Services Tax (GST) credit can be claimed for renovation expenses in a shop. It was advised that credit is possible if the expenses are not capitalized and are shown as revenue expenditure. For rented shops, expenses are not capitalized to immovable property, making them eligible for credit. If the shop is owned, eligibility depends on whether expenses are capitalized or charged to the Profit and Loss account. Capitalized expenses are ineligible, while those charged to P&L are eligible. The distinction between capital and revenue expenditure was also discussed, emphasizing the duration of benefit as the determining factor.