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ITC claim on Construction material purchase??

Mohammed Fahad (Become CA) (76 Points)

31 August 2020

Can we clain ITC on Construction material purchase for business site??

I purchase construction material upto Rs 140000 from registered dealer for my Laundry business site.
Can I claim ITC of that against my sale bill??

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4 Replies

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 31 August 2020

Section 17(5)(d) restrict ITC on goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation 2 to section 17(5) the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

So, if you capitalised this expense to Your Property(Fixed Assets) in. books than not allowed. If you expensed out this Expenses as Repair and maintenance in books, than its allowed.

3 Like

pratik sanjay mohadikar (accountant) (93 Points)
Replied 31 August 2020

Some more clarity is required on this. we are in service industry, and we are constructing a office building ok, we are using materials in it like wires,fabrication,electric materials etc, so can we use GST paid on this items purchased. 2. Can we claim gst paid on labour contract bill.

1 Like

Kaushik Joshi (Practising Chartered Accountant) (1527 Points)
Replied 31 August 2020

Pratik, consider it this way.
If you've two contracts, one of Immovable assets and other of movable assets, you'll be able to claim ITC of movable assets.
Since in your above question it involves electrical installations, if you could prove that they are not part of the immovable asset and can be separated from it, I'd suggest you to make a separate contract of the same and claim ITC.
As regards labour Bill on the same construction, I'm afraid it cannot be claimed since it'll be part of Immovable asset and will be capitalised.

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CA Akshay Hiregange (Partner - Audit & Assistance) (4515 Points)
Replied 31 August 2020

Can refer Safari Resorts - Orissa High Court case, although this is presently pending in the Supreme Court. ITC is highly disputable in nature, and as Mr. Kaushik has pointed out burden of proof lies with assessee to prove eligibility of ITC. As value seems less it may not be for capitalisation therefore, ITC can be said to be eligible.

1 Like