Hey there, tax enthusiasts! Today, we’re diving into a fascinating GST ruling involving M/s Ashish Arvind Hansoti, a business involved in constructing commercial properties. If you’ve ever wondered about the intricacies of claiming Input Tax Credit (ITC) for construction projects, this case has some valuable insights!
M/s Ashish Hansoti sought clarity on whether they could claim ITC on GST paid for inputs and input services used in the construction of a commercial property, which is subsequently rented out. Let’s break down the case and the key takeaways from the ruling.
Details of the Case
| Details | Information |
| Applicant | M/s. Ashish Arvind Hansoti |
| State | Maharashtra |
| Order No. | GST-ARA-88/2019-20/B-30 |
| Order Date | 12th March 2020 |
| Key References | Section 97 of CGST Act, Section 17(5)(d) of CGST Act, and Notification No. 11/2017-Central Tax (Rate) |
Questions Raised in AAR
The applicant wanted to know whether they are eligible to claim input tax credit (ITC) of GST paid on inputs and input services used for the construction of commercial immovable property, which is then used for renting.
Key Points from the Authority for Advance Ruling
- Applicant’s Argument: Ashish Hansoti argued that Section 17(5)(d) of the CGST Act, which disallows ITC on goods and services used for the construction of immovable property on one’s own account, should not apply because the property is used for renting, generating taxable output revenue.
- Authority’s Decision: The Authority for Advance Rulings (AAR) concluded that the applicant is not eligible to claim ITC for the construction of the commercial immovable property, as per Section 17(5)(d) of the CGST Act.
Analysis and Findings
The AAR found that:
- Section 17(5)(d) bars claiming ITC on goods and services used for the construction of an immovable property on one’s own account, even if such property is used in the course or furtherance of business (e.g., renting).
- The case of Safari Retreats Pvt. Ltd. vs. Chief Commissioner of Central Goods & Service Tax was referenced, where the Orissa High Court allowed ITC for mall construction meant for leasing. However, this decision is under appeal and has not attained finality.
- The AAR ruled that the provisions of Section 17(5)(d) apply to this case, disallowing the ITC claim.
Key References and Notifications
- Section 17(5)(d) of the CGST Act, 2017: Disallows ITC on goods and services used for construction of immovable property on own account.
- Safari Retreats Pvt. Ltd. Case: High Court decision allowing ITC, currently under appeal.
- Notification No. 11/2017-Central Tax (Rate): Initial GST rate notification for services.
FAQs
- Can businesses claim ITC for construction materials used in commercial properties?
- Generally, no. Section 17(5)(d) of the CGST Act disallows ITC for construction on one’s own account, even if used for business purposes.
- Does renting out a constructed property qualify for ITC?
- No, ITC is still disallowed under Section 17(5)(d) if the construction is on the applicant’s own account.
- Are there any exceptions to this rule?
- As of now, there are no exceptions, and the Safari Retreats case is pending in the Supreme Court, which may provide further clarity in the future.
Also Read this: Rental Services of e-bikes and Bicycles: Explained by AAAR
Conclusion
The ruling highlights that businesses involved in constructing commercial properties for renting cannot claim ITC on the GST paid for inputs and input services used in the construction. This case underscores the importance of understanding specific provisions under GST law to ensure compliance and accurate tax planning.
