GST ITC on Construction/ Tenant Specific Renovation of Rental Property

If renovation expenses (painting, wiring, retiling) are expensed in the Profit & Loss statement as repairs/maintenance, ITC can be fully claimed against GST on rental income under the CGST Act. If the expenses are capitalized in the balance sheet, standard GST rules block ITC under Section 17(5)(d), though the Supreme Court's Safari Retreats judgment provides grounds to argue eligibility under the "functionality test" if litigated. Treating these tenant-specific alterations as revenue expenses in accounting records is the cleanest, dispute-free way to claim ITC.

Short answer: mostly no, if the cost is capitalised.

Section 17(5)(d) blocks ITC on goods and services used to construct an immovable property on your own account, even if the property is rented out and you charge GST. "Construction" includes renovation, additions, alterations and repairs to the extent the cost is capitalised.

About Safari Retreats: the Supreme Court read the exception for "plant or machinery" using a functionality test. The Finance Act 2025 then amended 17(5)(d) retrospectively from 1 July 2017 to say "plant and machinery", which removes that route. Please check the current text before relying on either.

How to look at your spend:
- Flooring, wiring, painting, false ceiling that become part of the building and are capitalised: ITC blocked.
- Routine repairs that you expense in books, not capitalise: ITC is generally available.
- Movable items (loose furniture, standalone equipment not fixed to the building): not caught by the block.

Split the tenant fit-out bill by item type before booking it, so the movable and revenue portion does not get lost with the capital portion.

This [GST on commercial rent and ITC guide](https://taxgarden.in/blog/gst-on-rent-commercial-residential-rcm-itc-guide) covers the landlord side of rent and credit.