CAN A PERSON CLAIM ITC OF IRON AND STEEL FOR CONSTRUCTION OF COMMERCIAL BUILDING WHEN THE ASSESSEE IS INVOLVED IN RENTAL SERVICES?

Reply—Under section 17(5)(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business are also not eligible for input tax credit.

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.

Input tax credit in general is not available for construction, reconstruction, renovation, addition, alteration or repair of an immovable property even when such goods or services or both are used in course or furtherance of business. However, the limitation in such a scenario is extent of capitalization.

Refer ruling of AAR Rajasthan in matter of Rambagh Palace Hotels Pvt. Ltd dated 30.04.2019.  

However decision held by ORISSA HIGH COURT in case of Safari Retreats Private Limited dated 17.04.2019, ITC will be allowed in respect of goods or services used for construction of immovable property for letting out.