ITC on Plywoods, Light Fittings

[A SREENIVASARAO AND ASSOCIATES]

Dear Experts

Plywoods, Mica, Fevicol & Paints purchased for making Tiles display stand at Tiles Showroom. The stand has been fixed with on the floor for supporting purpose. The expenses has been classified as fixed assets and accounted in books of accounts under the head as "Showroom Display Fixtures". This has been removable and fixed with other place after making some additional work. Also this has been frequently altered the structures depends upon the tiles size and giving better view to customers. 

Whether ITC is eligibe for the above said expenses or blocked u/s 17(5) of CGST Act, 2017.

Thank You

[Sadanand Bulbule]

 Yes. You are eligible for ITC on such goods as long as they  are used in the course of furtherance of business. It is not blocked under Section 17[5] of the Act.

[YAGAY and SUN]

The eligibility of Input Tax Credit (ITC) on the purchase of Plywoods, Mica, Fevicol & Paints used in making a tiles display stand depends on how the stand is treated and the nature of its use in business, in light of Section 17(5) of the CGST Act, 2017.

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Legal Analysis: Section 17(5)(c) and (d) of the CGST Act, 2017 restrict ITC on:

• Works contract services when supplied for construction of immovable property (except where it is an input service for further supply of works contract service), and
• Goods or services received for construction of immovable property (other than plant and machinery) on own account, even if used in the course or furtherance of business.

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Key Considerations:

1. Nature of the Asset (Movable or Immovable):
   • If the display stand is fixed to the floor, but can be removed, relocated, or restructured without substantial damage or civil construction, it may be treated as a movable asset.
   • Since the structure is frequently altered and moved depending on tile sizes, it shows characteristics of a movable fixture rather than a permanently fixed immovable property.
2. Purpose of Use:
   • The display stand is used in the course or furtherance of business, specifically for marketing and customer presentation, which supports business activities.
3. Capitalisation in Books:
   • Though it is capitalised as "Showroom Display Fixtures", the accounting treatment is not the sole criterion for ITC eligibility. What matters more is whether the asset qualifies as immovable property under GST law.

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Conclusion – ITC Eligibility:

Based on the facts provided:

• The display stand appears to be movable and used for business promotion.
• Since it is not an immovable property, and no civil works or permanent affixation is involved, the restriction under Section 17(5)(c)/(d) does not apply.
• Hence, ITC on inputs like Plywoods, Mica, Fevicol, and Paints used for making the stand is allowable, provided other general conditions for availing ITC are satisfied (like possession of tax invoice, actual receipt of goods/services, etc.).

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[Shilpi Jain]

Credit should be eligilbe considering that its a business expense and not falling under the category of construction of immovable property or any other blocked credit under section 17(5).

[Ganeshan Kalyani]

Further, while capitalising please see if the GST portion has not been capitalised.

[Padmanathan KV]

I agree with views of experts. Provisions of section 17(5) is not attracted in the present case.

[KASTURI SETHI]

After in agreement with the experts, in simple words, such expenses must be reflected in Profit and Loss Statement.

[Padmanathan KV]

I beg to disagree here. All expenditure need not to reflected in profit and loss account for claiming ITC. For example - Plant & machinery, furniture and fitting are eligible for ITC even if they are entered in Balance Sheet. 

The condition of capitalization is applicable only for "construction" in section 17(5)(c) and (d). In the present case, the items used are for making showroom fitting/ furniture and not for construction of immovable property. Hence, even if they are entered in Balance Sheet as Fixure/ furniture, ITC is available in my humble opinion.

[A SREENIVASARAO AND ASSOCIATES]

Dear Experts

Thanks a lot for your valuable reply.

AI Summary

Input tax credit eligibility for display stand materials where fixture is removable and used in the course of business.
Input tax credit on plywood, mica, adhesives and paints used to fabricate a showroom display stand is not blocked where the stand is a removable, frequently altered fixture rather than immovable property; capitalisation in accounts does not determine eligibility, and general ITC conditions (invoice, receipt, tax paid, use in business) and proper GST treatment on capitalization must be satisfied.