Query relating Blocked Credit U/s 17(5)

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This discussion clarifies the treatment of Goods and Services Tax (GST) paid on the construction of an office building when Input Tax Credit (ITC) is blocked under Section 17(5) of the CGST Act. The consensus is that if ITC is not availed due to the construction being for immovable property (other than plant and machinery) on the company's own account, depreciation must be calculated on the full value of the asset, including the GST paid.

Abhishek Roy

Abhishek Roy (Querist)
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09 August 2020 Dear All,

Please clarify the confusion through Illustration below :-

A company has given a contract of Rs, 9,60,00,000 (Excluding of gst @ 28%) to a civil contractor for construction of office Building

The company is engaged in manufacturing and supply of Taxable commodities as has branches through out the country.

"Now we know that under section 17(5) of cgst rule this type of input is ineligible for ITC against your taxable supply"

My question is if we consider the same, it is treated as Fixed Assets(Building) of the company therefore according to my valuation = Rs. 9,60,00,000 + Rs. 2, 68,80,000(GST)= Rs. 12,28,80,000 to be transfered to Building(Fixed Assets A/c)

now at the end of the year on what amount I will calculate Depreciation.......?
Whether, we need to calculate depreciation on the full amount inclusive of gst= Rs. 12,28,80,000/- as I have not availed the input......against taxable supplies.

Or, we need to calculate depreciation on the Amount (Exclusing GST)= Rs. 9,60,00,000/-........................?

Which one is correct.

Lekhraj sood

Lekhraj sood (Expert)
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09 August 2020 You need to calculate depreciation on the full amount inclusive of gst= Rs. 12,28,80,000/- as you have not availed the input tax credit.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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10 August 2020 Yes... correctly said....Full value including GST Should be considered for depreciation calculations

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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19 July 2025 Section 17(5)(d) of CGST Act:

Input tax credit shall not be available in respect of goods or services received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account.
So, yes — ITC on GST paid for office building construction is blocked.

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