ITC taken query in GST in case of rental income from commercial property

[milan bamal]

We have given our warehouse (a commercial building) on rent to a company. Every month, I raise a rent tax invoice. I have to pay GST to government through GST return

Now, I want to understand on which items/services I can claim Input Tax Credit (ITC) so that I can adjust it against my output GST liability.

[milan bamal]

Kindly Note this Point before any answer

Warehouse is in name of Company A

Comapny A is Owner

2nd Company B is Tenant

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

The query is incomplete. Kindly enumerate the details of expenditure, on which GST suffers, that will be incurred by A. Only then, can a cogent reply be provided, else, the only option available will be to simply quote the law contained in Sec.16 of the CGST Act, 2017

[Shilpi Jain]

Except the S. 17(5) credits u would be eligible to take all credits.

So now u need to check what expenses u need to take credit and see if it falls under the above provision

[Pinnacle Tax Advisor]

You are eligible to claim input tax credit (ITC) on services that are directly attributable to your outward supply of services (i.e., leasing of warehouse), except for those services blocked under Section 17(5), subject to fulfillment of the conditions prescribed under Section 16 of the CGST Act

[YAGAY andSUN]

In the given facts, Company A (owner) is supplying taxable renting of immovable property service to Company B (tenant) and discharging GST on such rental income. Accordingly, Company A is entitled to avail ITC under Section 16 of the Central Goods and Services Tax Act, 2017 to the extent inputs/input services are used in the course or furtherance of this taxable renting business, subject to restrictions under Section 17(5).

Eligible ITC (generally allowable):

Company A can avail ITC on goods/services directly linked to maintenance and operation of the warehouse, such as:

• Repairs and maintenance (civil, electrical, plumbing not resulting in capitalisation)
• Security services, housekeeping, pest control
• Professional services (legal, accounting, leasing consultancy)
• Insurance of building
• Property management services
• Brokerage/commission paid for renting
• Utilities (if borne by Company A and not recovered purely as reimbursement)

These qualify as input services used for providing taxable renting service and hence ITC is admissible.

Blocked / Restricted ITC (important) U/S 17(5):

• Construction / reconstruction / renovation / additions to the warehouse, to the extent capitalised in books, is blocked. This is a critical restriction, even if GST is paid, ITC is not available if the cost is capitalised.
• Works contract services used for construction of immovable property (other than plant & machinery) are also blocked.

Key distinction (practical):

• If expense is revenue in nature (P&L) - ITC generally allowed
• If expense is capitalised (fixed asset) - ITC blocked

Other conditions:

• Valid tax invoice in name of Company A
• GST actually paid by supplier
• Return compliance (GSTR-2B reflection / Section 16 conditions)
• No personal or non-business use

Special points:

• If the warehouse is used exclusively for taxable renting, full ITC is available (except blocked credits).
• If partly used for exempt/non-business purposes, proportionate reversal under Section 17(2) applies.

Company A can claim ITC on all operational and maintenance-related inward supplies used for renting activity, and utilise the same to offset output GST on rent. However, ITC on construction or capitalised renovation of the warehouse is not admissible, which is the most significant restriction in such cases.

AI Summary

Input tax credit on commercial warehouse renting depends on business use, with capitalised construction costs blocked under GST rules. Input tax credit under GST for taxable renting of a commercial warehouse is generally available on inward supplies used in the course or furtherance of the renting business, subject to Section 16 conditions and the blocked credit restrictions in Section 17(5). Operational and maintenance expenses such as repairs, security, housekeeping, professional services, insurance, property management and brokerage are stated to be eligible, while construction, reconstruction, renovation or other capitalised additions to the warehouse are described as blocked credits. Where the property is used partly for exempt or non-business purposes, proportionate reversal under Section 17(2) applies.