AVAILEMENT OF GST CREDIT

[SURYAKANT MITHBAVKAR]

We are manufacturing of Pharma Machinery registered under GST Act. We have buy new Factory Gala. The maintaining the same we have did some renovation work in the same gala & capitalised the same in our books. The vendor who did work has issued GST Tax invoice charging GST whether we are eligible to avail GST credit for the same.

[Amit Agrawal]

ITC is not available in given case as subject renovation expenses are capitalised in your books to the immovable property.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[SUDHAKAR SIVARAMAN]

Input tax credit cannot be claimed since you are not eligible to take credit on expenses incurred for renovation of any immovable property except for creating foundation work for installing plant and machineries. Further even if you purchased any construction material like steel, cement etc directly then also you are not eligible to take credit on such expenses.

[KASTURI SETHI]

Renovation expenses can be treated as revenue expenditure. What is the reason of capitalizing the same in books of accounts ?

[SUDHAKAR SIVARAMAN]

Even if it’s revenue nature no input tax credit allowed as per GST law.

[Amit Agrawal]

Explanation for Clause (c) & (d) of Section 17 (5) of the CGST Act, 2017 is worth noting in the context of query raised:

"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;"

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

In order to be eligible for ITC on renovation expenses, the querist should have shown these expenses in Profit and Loss Account.

[Padmanathan KV]

Agree with the views of Experts Amit ji and Kasturi Sir. Pls note the following provisions:

17 (5) 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 the following, namely:-

(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;

(d) 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;

Since in the instant case, the work done has been capitalized in the books, it shall be treated as "construction of an immovable property" and ITC shall not be available.

[Shilpi Jain]

What is a factory gala?

[Kapil Gupta]

I agree with all experts but still most of the professionals and tax officers are disallowing ITC on construction/renovation activities irrespective of its treatment in books.

AI Summary

Input tax credit restriction for renovation capitalised to immovable property denies credit where costs are capitalised.
Input tax credit is not available where renovation, reconstruction, additions, alterations or repairs are capitalised in the books and thus treated as construction of an immovable property; such capitalised expenditure falls within the statutory exclusion and GST charged on those renovation works cannot be claimed as credit.