ITC on goods/services used in construction of mall can be used against GST payable on rental income: High Court
[Safari Retreats (P.) Ltd. v. Chief Commissioner of CGST [2019] 105 taxmann.com 324 (Orissa)]
The petitioner was engaged in construction of shopping malls and letting out of the shops so constructed. For construction purpose, materials and other inputs in the form of cement, sand, steel, electric equipments and services in the form of consultancy, architectural, legal services, etc., were
required. Those goods/services purchased were taxable and petitioner had paid huge amount of GST.
The petitioner was informed by the GST authorities that it could not avail of benefit of input tax credit paid on the purchase of input material and services used for the construction of shopping mall for set-off against GST payable on rent received from the tenants of the shopping mall. The petitioner filed writ petition contending that the input tax credit should be allowed to him.
The High Court observed that input tax credit is not available to a taxable person who has constructed the immovable property 'on his own account'. This condition cannot be applied in cases where construction of immovable property is intended for letting out. In this case, the shopping mall which the petitioner was constructing was neither intended for sale nor on his own account but was 'intended for letting out'. Therefore, narrow interpretation by the department could not be accepted as the petitioner was retaining the property not for its own purpose but to let out the same. The High Court has held that the petitioner would be allowed to set off the input tax credit on the goods/services used in the construction of mall from the GST payable on the rental income received.
[Safari Retreats (P.) Ltd. v. Chief Commissioner of CGST [2019] 105 taxmann.com 324 (Orissa)]
The petitioner was engaged in construction of shopping malls and letting out of the shops so constructed. For construction purpose, materials and other inputs in the form of cement, sand, steel, electric equipments and services in the form of consultancy, architectural, legal services, etc., were
required. Those goods/services purchased were taxable and petitioner had paid huge amount of GST.
The petitioner was informed by the GST authorities that it could not avail of benefit of input tax credit paid on the purchase of input material and services used for the construction of shopping mall for set-off against GST payable on rent received from the tenants of the shopping mall. The petitioner filed writ petition contending that the input tax credit should be allowed to him.
The High Court observed that input tax credit is not available to a taxable person who has constructed the immovable property 'on his own account'. This condition cannot be applied in cases where construction of immovable property is intended for letting out. In this case, the shopping mall which the petitioner was constructing was neither intended for sale nor on his own account but was 'intended for letting out'. Therefore, narrow interpretation by the department could not be accepted as the petitioner was retaining the property not for its own purpose but to let out the same. The High Court has held that the petitioner would be allowed to set off the input tax credit on the goods/services used in the construction of mall from the GST payable on the rental income received.
No comments:
Post a Comment