ITC of leasehold rights and the shed standing upon it

[Narayan Pujar]

A humble request to the members to guide me on the following issue –

One of my clients is going to procure lease rights of a land under an ‘Agreement of assignment’ on ‘as is basis’ from one supplier [original grantor is MIDC] and an ‘Industrial shed’ standing upon it on ‘as is where is basis’ owned by another supplier vide a separate transfer agreement.

Will there be any issue while claiming ITC, particularly in terms of Section 17(5)(d)? I am of the view that credit is admissible. I found rulings denying ITC on assignment of lease rights, however, there the underlying reason being that lease rights are for construction of immovable property. And in the instant case of my client, there is no construction of immovable property, per se. So, will buying lease rights of land and industrial shed on the land on as is where is basis amount to ‘for construction of immovable property’?

AI Summary

Client Seeks Guidance on ITC Eligibility for Leasing Land and Shed; Focus on Section 17(5)(d) of GST. A client is acquiring lease rights to land and an industrial shed, both on an 'as is where is' basis, and seeks guidance on claiming Input Tax Credit (ITC) under GST, particularly concerning Section 17(5)(d). The primary concern is whether these acquisitions are considered for the construction of immovable property, which could affect ITC eligibility. Responses suggest that since no construction is involved, ITC should be admissible. The discussion also touches on the distinction between capital and revenue expenditure and how these classifications impact ITC claims. Further analysis is suggested to determine the nature of the expenditure and its treatment under GST provisions.