Input crdit

[mathur ramachandran]

Sir,

My client, a Firm, is constructing their own building for office use and use as godown. They are a registered dealers under GST.and are in the business of trading.They have given contract to a construction firm for construction. The builder will issue a bill with GST. Can they claim the GST thus paid to the builder as input credit from their output tax liability on sale of their products in the normal course?

Kindly clarify

Thanking you, C A M S Ramachandran, Mobile 9447776812

[Rajagopalan Ranganathan]

Sir,

According to Section 17 (5) (d) of CGST Act, 2017 "Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of 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."

[Shilpi Jain]

You could try taking the credit and reverse under protest immediately with intimation to department and subsequently based on the outcome of the decision in Safari retreats can see if the benefit of credit can be taken. Though dispute free answer would be to not avail as the provision does not permit.

[KASTURI SETHI]

It is not safe to take ITC in the scenario explained by you. As per Section 17(5)(d), ITC is not admissible. The department has challenged the judgement of Safari Treats (Pvt.) Ltd in the Supreme Court on 8.11.19 = 2020 (3) TMI 1150 - SC ORDER which is still pending decision. Since the matter is sub judice, AAR Karnataka in respect of Vikram Traders reported as 2020 (35) G.S.T.L. 490 (A.A.R. - GST - Kar.) = 2020 (3) TMI 893 - AUTHORITY FOR ADVANCE RULING, KARNATAKA has rejected the application of the party on this very ground.

If ITC is taken, it is certain that the department will issue SCN

[Shilpi Jain]

I very much agree with your view sir. That is why I have suggested to take the credit and reverse it under protest which will have no risk for the taxpayer but only a benefit for the reason that he can take back the credit once any favaourable decision comes in his favour.

[KASTURI SETHI]

Respected madam, Here question arises whether reversal of ITC UNDER PROTEST legally valid ? The protest is lodged only when department directs to pay duty. Take credit on your own and thereafter reverse on your own under protest. Will you please throw light how legally valid ? Any legal force. With due regards.

[Ganeshan Kalyani]

Sir, ITC is not allowed as per plain reading of Sec.17(5).

[YAGAY andSUN]

We are in agreement with Sethi Sir.

AI Summary

Input tax credit denied for self-constructed immovable property; practitioners warn of legal uncertainty and enforcement risk. Input tax credit is not available for goods or services received for construction of an immovable property (other than plant or machinery), including reconstruction, renovation, additions, alterations or repairs to the extent capitalised, even when used in the course or furtherance of business. Although some decisions and rulings have been relied on to support credit claims, favourable orders are under challenge and certain advance rulings have refused relief; claiming credit risks departmental notices, and reversing credit 'under protest' is debated as to its legal efficacy and risk.