How to claim GST ITC on Repair and Maintenance of Building?

Can GST Input credit be claimed on Repair and Maintenance of Building?

GST ITC on repair and maintenance of Building can be claimed only if it amounts to routine repairs not the construction of the immovable property. Let us discuss the following along with the provisions of the CGST Act, 2017.

GST Input credit can be claimed only if eligibility conditions mentioned in Section 16 of the CGST Act are fulfilled. However, the following category of Input credit should not fall within the ambit of Blocked credits mentioned in Section 17(5) of CGST Act, 2017.

Construction of immovable property Section 17(5)

Notwithstanding anything contained in Section 16 of CGST Act,2017 Input Tax Credit shall not be eligible for the following.

Clause (c) of Section 17(5): Works contract services  when supplied for construction of an immovable property(other than plant & machinery)

Clause (d) of Section 17(5): Construction of an immovable property(other than plant & machinery) when used for the furtherance of business.

  • For Clause (c) and (d), Construction includes re-construction, renovation, alteration, additions, or repairs to the extent of capitalization to the said immovable property.
  • Here “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods and services or both includes structural foundation but exclude

i) Land, building, or any other civil structure

ii) Telecommunication towers

iii) Pipelines laid outside factory premises

  • The Works Contracts has been defined in Section 2(119) of the CGST Act, 2017 as, “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration, or commissioning of any immovable property wherein the transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.”

Analysis of above provision of CGST Act

The above provision clearly specifies ITC on repair and maintenance of the building (immovable property) is available. However, if such expenditure is capitalized in accounting records. The credit pertaining to such capitalization will not be available.

Capitalization here refers to the recording of such expense as fixed assets in books. If the expenditure is capitalized, depreciation will be claimed on such an amount of Input credit.

The expense if shown in the “Repair & Maintenance” account and Input credit is separately recorded. Such credit can be claimed in GST return (GSTR-3B).

What if works contract services are provided by sub-contractor to the main contractor?

There may be instances where works contract services can be availed by the person who is in the same line of business and is using such services for further supply of works contract services.

For example, A building developer may engage the services of a sub-contractor for a certain portion of the whole work. The sub-contractor will charge GST on the invoice raised to the main contractor.

The main contractor will be entitled to take input credit on the tax invoice raised by the sub-contractor as his own output supply is of works contract service.

Now, further, the main contractor supplies his services to a company that is not engaged in works contract services. The input credit to the company on the tax invoice raised by the main contractor will not be available.

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Frequently Asked Questions

Yes, GST Input credit can be claimed for repairs and maintenance of machinery. Section 17(5) provides restriction for building capital expenses not for any revenue expenses relating to machinery.

In case blocked credit has been claimed on construction of immovable property. Such amount should be reversed along with applicable interest.

Otherwise, it will definitely pose a problem for GST auditor who at that time have to show it in GSTR-9C.

Yes, depreciation can be claimed on GST component. Only in case of construction of immovable property, where GST on capital expenses form part of asset. The GST amount is not claimed as Input credit rather yearly depreciation is provided.

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