Elgibility of ITC on Cement, Tiles and other construction materials for rental property
This query is : Resolved
10 April 2025
Good morning sir/s,
Can we avail/claim of ITC on Purchase of Cement, Tiles and other construction materials for rental property, which is lettable and GST is going to be paid on receipts of rent, since the property is in furtherance of business
Can we avail/claim of ITC on Purchase of Cement, Tiles and other construction materials for rental property, which is lettable and GST is going to be paid on receipts of rent, since the property is in furtherance of business
10 April 2025
The Supreme Court's October 2024 ruling significantly impacts Input Tax Credit (ITC) eligibility for construction materials used in rental properties, introducing critical exceptions to Section 17(5)(d) of the CGST Act. :
Key Implications of the Ruling
1. ITC Eligibility via the "Plant" Exception
The Court held that buildings constructed for commercial renting/leasing may qualify as "plant" under GST law if they are functionally integral to providing taxable services (e.g., renting). This allows ITC claims on cement, tiles, and other materials used in construction, provided the property meets the functionality test:
The structure must be essential for delivering rental/leasing services.
2. Avoidance of Double Taxation
Denying ITC in such cases would lead to double taxation: GST is paid on construction materials and again on rental income. The ruling aligns with GST’s objective of eliminating tax cascading.
3. Retrospective Application
Businesses can claim ITC retroactively for past projects, subject to GST return deadlines (e.g., FY 2023-24 claims must be filed by November 30, 2025).
Critical Tests for Eligibility
Limitations and Considerations
Each case requires factual evaluation by tax authorities.
Constitutional challenges to Section 17(5)(d) were dismissed, meaning the provision remains valid but interpreted narrowly.
Though the ruling permits ITC claims for commercial rental properties that function as "plants," provided they meet stringent operational criteria.
Key Implications of the Ruling
1. ITC Eligibility via the "Plant" Exception
The Court held that buildings constructed for commercial renting/leasing may qualify as "plant" under GST law if they are functionally integral to providing taxable services (e.g., renting). This allows ITC claims on cement, tiles, and other materials used in construction, provided the property meets the functionality test:
The structure must be essential for delivering rental/leasing services.
2. Avoidance of Double Taxation
Denying ITC in such cases would lead to double taxation: GST is paid on construction materials and again on rental income. The ruling aligns with GST’s objective of eliminating tax cascading.
3. Retrospective Application
Businesses can claim ITC retroactively for past projects, subject to GST return deadlines (e.g., FY 2023-24 claims must be filed by November 30, 2025).
Critical Tests for Eligibility
Limitations and Considerations
Each case requires factual evaluation by tax authorities.
Constitutional challenges to Section 17(5)(d) were dismissed, meaning the provision remains valid but interpreted narrowly.
Though the ruling permits ITC claims for commercial rental properties that function as "plants," provided they meet stringent operational criteria.
29 September 2025
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