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CA Intermediate · Taxation · Input Tax Credit

Anil Constructions, a registered contractor, bought cement and steel with GST of Rs 3,00,000 to construct a commercial complex on its own land, intended for letting out on rent. It also paid GST of Rs 60,000 on works contract services to construct a factory building (plant and machinery excluded) for use in its manufacturing business. What is ITC allowed to Anil under section 17(5)?

The ITC allowed is nil. Credit on goods or services used in constructing an immovable property other than plant and machinery on own account, and on works contract services for such construction, is blocked under section 17(5), even though the buildings serve business purposes.

  1. ANil, since both are blockedCorrect
  2. BRs 3,60,000
  3. CRs 60,000
  4. DRs 3,00,000

Explanation

Section 17(5)(c) and (d) block credit on works contract services and on goods or services used to construct an immovable property (other than plant and machinery) on own account, even when it is used in business. The exception applies only when the construction is itself used for making outward supplies of works contract service. Here both the rented complex and the factory building are blocked, so ITC is nil.

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