Authority of Advance Ruling says no to Input Tax Credit

Authority of Advance Ruling says no to Input Tax Credit

ITC not admissible on the construction of immovable property used for business

The Uttar Pradesh Authority of Advance Ruling (AAR) has ruled that Input Tax Credit (ITC) is not admissible on the construction of immovable property used for business.

The applicant, Tianyin Worldtech, is engaged in the manufacturing of chargers of mobile phones and their spare parts. The company purchased an old factory for the expansion of business and also desired to make new construction and set up the plant and machinery.

It approached AAR to determine the admissibility of ITC paid on the cost to be incurred in relation to the construction of the immovable property used for business.

But the Coram of Vivek Arya and Abhishek Chauhan ruled that the ITC paid in relation to the activity mentioned was not admissible.

The Coram said that when the goods or services were bought for the construction of an immovable property, which would be used for business, the Goods and Services Tax (GST) paid on such goods or services was not eligible to be claimed as ITC.

That is if the immovable property was constructed for its own purpose, as the owner would become the end-user. Therefore, he cannot avail ITC of the cost incurred on construction goods due to a break in the tax chain.