Input tax credit

This query is : Resolved

SHYAMLAL KAYYARUVATH (Querist)
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22 February 2019
Respected sir,

My brother is starting a trading business of Baby toys and would like to buy furniture and make necessary modification on building like electrical fittings and light, whether the GST charged on furniture and electrical fittings is available as input tax credit?

CA NEERAJ SHARMA

CA NEERAJ SHARMA (Expert)
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22 February 2019 Two relevant things in Section 17(5) are –
ITC on Works contract services when supplied for construction of immovable property, other than plant and machinery available only if it is for the further supply of works contract service.

ITC is not available on Goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even though it is used in course or furtherance of business.

Explanation.- For the purposes of above clauses, the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property; Meaning of plant and machinery Credit of tax paid on goods and services used for construction of immovable property including work contract service has been allowed only if such immovable property is in the nature of plant and machinery.
The expression ‘plant and machinery’ has been defined through explanation in Chapter V of the CGST Act to mean apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes – Land, building or any other civil structures; Telecommunication towers; and Pipelines laid outside the factory premises.

So the situation is as follows –

If furniture is “Used for construction of Immovable property” – ITC is blocked, so not allowed

“Immovable Property” has not been defined in GST Act. So we have to understand it in common business parlance.

Normally, furniture is movable, as it can be shifted easily from one place to another. Examples are Sofa, Chairs, Tables etc. So they will be considered “Movable Property”, and ITC will be allowed on them.

But some furnitures are such that, they are attached to Walls, celings, or floors. They become part of building permanently. In such cases, it may be considered as “Used for Construction of Immovable Property” and thus ITC will not be allowed.

Conclusion
In view of the above provisions, ITC of capital goods being Furniture and Fixtures, if in the nature of movable property, then it is available.

However ITC on furniture & Fixtures in the nature of immovable property, which become part of building, will not be available.

Gokul Sharma

Gokul Sharma (Expert)
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24 February 2019 ITC On furniture & Fixtures in the nature of immovable property, which become part of building, will not be available it is allowed as depreciation in future years

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