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2022 (2) TMI 830 - AAR - GSTInput tax credit - expenditure incurred for 'Civil and Interior Works' - said property is further used for letting out to different tenants on rental basis viz. for furtherance of business - ITC on construction of commercial complex - Section 16 of the CGST Act, 2017 - HELD THAT:- The applicant has agreed to renovate and built out interior of the Demised Office Space as per the specification of tenants and the cost of such renovation would be part of rent which would be calculated by adding 10% profit element (as interest cost) over the actual expenditure of renovation/furnishing/interior works and it shall be recoverable within the span of maximum five years as a component of rent payable on monthly basis Section 17 of the CGST Act, 2017 provides for apportionment of credit and blocked credit. It is pertinent to have a look at the relevant legal provisions under Section 17(5) of the CGST Act - According to Section 16 (1) of the CGST Act, 2017, every registered person is entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used by him in the course or furtherance of his business. It is found that apart from conditions as laid down under Section 16 of the CGST Act, 2017; Section 17 provides for restrictions and factual position and situations where ITC would not be available. ITC restricted in case of construction undertaken on own account - HELD THAT:- Clause (d) restricts input tax credit of goods and services used by a person for construction of an immovable property (except plant and machinery) on his own account. Thus, if a person purchases construction material and engages a labor contractor to provide the constructions services using the purchased material, ITC shall not be available of both the goods purchased and the services of the labor contractor procured. ITC restricted in case of works contract services only to the extent expenses are capitalized - HELD THAT:- Clause (c) and clause (d) use the word 'construction' and as per the Explanation to clause (c) and clause (d) construction is only to the extent of capitalization. Consequently, ITC of any expenditure related to construction that is capitalized in the books of accounts shall be blocked. This shall not only cover the value of materials and works contract services but also expenditure directly related to the construction like inward supply of services from real estate agent, architect, interior decorators as these are involved in the establishment of the immovable property. ITC eligible when works contract services used in respect of construction of plant and machinery - HELD THAT:- Clause (c) and (d) of section 17(5) restricts ITC in respect of works contract services and goods or services used towards construction of immovable property. However, both the clauses clearly exclude 'plant and machinery'. This means that the ITC restrictions are applicable only in case of immovable property. These restrictions are not applicable on plant and machinery - the effect of this explanation is that ITC on input of any goods or services including works contract service used towards construction of immovable property that is desired to be capitalized in the books of accounts shall not be admissible. Clause (c) and (d) of section 17(5) restricts ITC in respect of works contract services and goods or services used towards construction of immovable property. As such, input tax credit (ITC) of GST paid in relation to 'civil and interior works' in building located at C-32, Sector-62, Noida and on 'construction of commercial complex' located at Plot No. 18, Block C, Sector-153, Noida does not seems to be admissible.
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