AVAILING OF INPUT TAX CREDIT

[DR.MARIAPPAN GOVINDARAJAN]

One trust section 8 company is running nearly 10 schools. They also rented shops to the vendors. They are collecting GST on rental charges. The services rendered to the students are exempted from GST. They collect rent along with GST and paid the same to the department. The question here is as to whether the trust can avail input tax credit paid for the maintenance or other expenses for the rented buildings/

[Shilpi Jain]

When the outward supply (renting) is taxable, GST paid on related expenses (maintenance, etc.) will be eligible.

Why is there a doubt in this regard?

[DR.MARIAPPAN GOVINDARAJAN]

The trust has not availed input tax credit till time. They are in the hope that since they are exempted from GST they are not eligible to avail ITC. For confirmation I raised this query. Thank you ma'am.

[Sadanand Bulbule]

Dear Sir

I agree with the view of Madam Shilpi ji. The following explanation to Section 17 [5][c] & [d] of the GST Act plays crucial role in deciding the entitlement of ITC used for furtherance of a business by a taxable person as long as the immovable property is not capitalised in the books of accounts.

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;

AI Summary

Input tax credit eligibility: GST on expenses for taxable rentals is claimable unless costs are capitalised as immovable property.
Whether a Section 8 trust running schools that also makes taxable rentals can claim input tax credit on GST paid for maintenance and related expenses: GST on expenses used for a taxable outward supply is eligible for credit where inputs further the taxable activity. However, inputs forming part of construction, reconstruction, renovation, additions, alterations or repairs are blocked to the extent they are capitalised as immovable property in the accounts; if not capitalised and used for the taxable renting activity, ITC is available.