In case of letting of immovable property service , in our case supplier lets out hall on rent, whether tax payer can claim ITC of works contract services like painting work of hall, renovation expenses,which are debited to Profit & loss account. Second question is, whether this above mentioned ITC can be utilised for set off against output supply of goods.

Reply-Under section 17(5)(c)works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service are not eligible for input tax credit.

Further 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.

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.

In case of  Rambagh palace hotels pvt. ltd dated 30.04.2019  AAR,Rajasthan held that ITC will not be available to the extent of capitalization of building materials.