Repair and Maintenance Input in case of Immovable property given on rent

[Manpreet Gulati]

Dear All,

A taxpayer is the owner of a hotel, who has further given on rent and has rental income as per GST. He had incurred repair and maintenance expenses for the hotel, which is a part of his revenue expenses.

Can he claim the Input of repair and maintenance expenses, like purchase of sanitary items, paint and other items related to it.

Regards

Manpreet

[Sadanand Bulbule]

Dear Sir

For your query, please refer the following AAR and the ratio of the same applies to your facts as well:

2024 (3) TMI 673 - AUTHORITY FOR ADVANCE RULING, TAMIL NADU - IN RE: M/S. SUSWANI FOUNDATIONS PRIVATE LIMITED

[Amit Agrawal]

IMHO, subject ITC is available to the tax-payer in given situation. In other words, blockage of ITC u/s 17(5) is not applicable in given situation. 

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

[K.lakshmipati rao]

As per the provisions of Section 16(1) of CGST Act 2017, a registered person is entitled to take credit of the input tax charged on any supply of goods or services which are used or intended to be used in the course or furtherance of business.

For the purpose of Section 17(5)(C) &(D) of the CGST At 2017, the expression “Construction” is defined to include re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. It is pertinent to note that “Construction” is one of the elements of a works contract and it can be inferred that all that constitutes a works contract, need not be a “Construction”. 

It may be noted that the term “Construction” mainly refers to the original works i.e., new construction, and mainly covers the activity of erecting a building. If any major alterations are carried out to the already constructed structure, then such activity can be said to be in the nature of construction. Thus, keeping the enduring benefit of asset in mind, and, in line with the accounting standard as well, it is only the major alteration works that alone would be capitalized in the books of accounts, which adds to the life and value of the assets. In other words, minor modifications, additions, alterations or repairs or upkeep & maintenance etc. cannot be called “Construction”. Accordingly, a registered person is entitled to take credit of the input tax on such repairs.

[Manpreet Gulati]

Thank you  Sadanand Bulbule, Amit Agrawal Ji and  K Lakshmipati Rao Ji for your valuable feedback.

[Shilpi Jain]

Hope none of these repair expenses are capitalised. If not capitalise then credit is eligible.

[Ganeshan Kalyani]

I agree with the view of the experts.

[Padmanathan KV]

ITC is eligible to those of revenue nature as it is not blocked under section 17 (5).

AI Summary

Input Tax Credit on repairs allowed where expenses are revenue in nature and not capitalised under GST.
A hotel owner receiving rental income may claim Input Tax Credit on repair and maintenance expenses if those costs are revenue in nature and not capitalised. Entitlement to ITC arises where supplies are used in the course or furtherance of business. Section 17(5) blocks credit only to the extent expenditures are capitalised for construction, reconstruction, renovation or major alterations; routine repairs and minor upkeep that are not capitalised remain eligible for ITC.