ITC ON FLOORING TILES

[DEEPAK SHARMA]

We are going to do renovation of floor of our office and factory with Flooring Tiles and Flooring Stone, the supplier is giving GST bill, either we can take credit for the same. Please advice if possible quoe AAR judgment.

Thanks

[KASTURI SETHI]

Expenses incurred on account of repair, maintenance, renovation etc. and have not been capitalized in your books of account for the purpose of accounting treatment and booked in general ledger as repair, maintenance , renovation etc. are eligible for availing ITC. For more support and details go through the following decision of AAAR :-

2020 (37) G.S.T.L. 136 (App. A.A.R. - GST - Kar.) = 2020 (5) TMI 388 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA IN RE : WEWORK INDIA MANAGEMENT PVT. LTD.

[Ganeshan Kalyani]

ITC is restricted on goods and services used for construction which includes renovation only if the expenses are capitalsed in books of accounts. If it is considered under repairs and maintenance then ITC is allowed. However, sometime the amount of expense also depends. I mean if the amount is very huge and accounted into repairs account, then it would not justify that it is revenue expenditure.

[Hariharan Sundaram]

Respected KASTURI SETHI ji, in the case of 2020 (37) G.S.T.L. 136 (App. A.A.R. - GST - Kar.) = 2020 (5) TMI 388 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA IN RE : WEWORK INDIA MANAGEMENT PVT. LTD. the issue was availability of ITC on detachable wooden flooring and the same was not captilized and categoried as furniture and fixtures for which the AAAR has allowed the credit on the two grounds, one is "movable" and another one is such expenditure is not capitalized. However in the recent ruling of AAR Maharashtra in the case of M/s Sundharams Private Limited - 2020(7) TMI 511 has denied ITC on the paver blocks after observing that " As per Section 17(5)(d) of the CGST, 2017, No ITC is available on 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.

Sir in the instant case flooring tiles are fastened to floor and the same cannot be retrieved or movable without making considerable damage . Further as per the Explanation appended to the same Sub Section, 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; Sir, Kindly guide us which ruling is correct?

[KASTURI SETHI]

“construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

No doubt it is immovable property. Exclusion clause does not use the word 'capital goods' but construction of an immovable property and construction includes renovation, repair etc. So, if any expense which is capitalised over a period of years, ITC would not be available. If the nature of expense is such that it is not capitalised, then credit is admissible. If the expense of flooring tiles is booked as revenue expenditure, ITC is admissible. If the expense of flooring tiles is booked as capital expenditure, ITC will not be available. I hope you know the difference between these two accounting terms.

In simple words, if you have booked these expenses in Profit & Loss Account, creditis admissible.

[KASTURI SETHI]

The case law regarding renovation as revenue expenditure.

2020 (7) TMI 688 - MADRAS HIGH COURT PANDIAN HOTELS LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, MADURAI

 

AI Summary

Input Tax Credit on Flooring Tiles Allowed if Recorded as Repairs, Not Capitalized in GST Renovation Expenses. A discussion on the eligibility of Input Tax Credit (ITC) for flooring tiles used in office and factory renovations under GST. The consensus among participants is that ITC is available if the expenses are not capitalized and are recorded as repairs and maintenance. However, if the expenses are capitalized as part of immovable property construction, ITC is not available. References to case laws, including decisions by the Appellate Authority for Advance Ruling (AAAR) and the Advance Ruling Authority (AAR), highlight differing interpretations, emphasizing the importance of how expenses are categorized in financial records.