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ITC on Building Hotel

18 June 2025

Hello,

I am constructing a building on a rented property for hotel purposes. Can I claim the ITC on the construction expenses. The building is being build purely for business purposes.

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4 Replies

Rama chary Rachakonda (Master in Accounts & high court Advocate) (8545 Points)
Replied 18 June 2025

Claiming ITC on Construction Expenses Under the Goods and Services Tax (GST) regime, you can claim Input Tax Credit (ITC) on construction expenses for a building used for business purposes, subject to certain conditions. Conditions for Claiming ITC To claim ITC on construction expenses: -

*Business Purpose*: The building should be used for business purposes, such as a hotel. - *GST Registration*: The supplier of construction services should be GST-registered. -

*Inward Supply*: You should have received the construction services and paid GST on them. ITC Eligibility - *Construction Services*: You can claim ITC on construction services, including labor, materials, and other related expenses. -

*GST Rate*: The GST rate on construction services is typically 18% or 12%, depending on the type of construction and the GST rate applicable. Important Considerations - *Reversal of ITC*: If the building is not used for business purposes or is used for exempt supplies, you might need to reverse the ITC claimed. - *Documentation*: Maintain proper documentation, including invoices, payment receipts, and records of construction expenses. Conclusion To claim ITC on construction expenses for your hotel business: -

*Verify GST Registration*: Ensure the supplier of construction services is GST-registered. -

*Maintain Documentation*: Keep proper records of construction expenses and GST payments. -

*Claim ITC*: Claim ITC on construction expenses in your GST returns, ensuring compliance with GST laws and regulations.

Molly 's (4 Points)
Replied 18 June 2025

Would the section Section 17 (5) (d) of the CGST Act prohibits ITC claims on construction materials used in construction of immovable property except for plant and machinery not be applicable in this case?

Simeon Gutmann (Gutmann) (22 Points)
Replied 19 June 2025

Originally posted by : Molly 's
	Would the section Section 17 (5) (d) of the CGST Act prohibits ITC claims on construction materials used in construction of immovable property except for plant and machinery not be applicable in this case ? Poor Bunny

Yes, construction materials such as cement, steel, bricks… and real estate construction services (except plant/machinery) are not eligible for ITC deduction if used for construction of real estate for the investor himself, whether for business or not.

Bradley Earnest (6 Points)
Replied 24 June 2025

Yes, you can claim ITC on construction expenses only if the expenses are not capitalized. If the construction cost is capitalized as immovable property, ITC is blocked under Section 17(5)(d) of the CGST Act. Check how your accounting treatment is slope game.