Request for GST Clarification regarding ITC

To address your questions regarding GST and Input Tax Credit (ITC), let's break down the information. *ITC on GST Paid for Land Lease* The GST paid under Reverse Charge Mechanism (RCM) for land lease can be claimed as ITC, but there are certain conditions to be met. According to the GST Act, ITC can be availed on input services used in the course or furtherance of business.¹ Since the land is used for building a commercial property and generating rental income, the ITC on GST paid for land lease can be claimed against the GST payable on rent received. *ITC on GST Paid for Building Maintenance* Regarding building maintenance services like DG set AMC, Lift AMC, Vallet Parking Equipment AMC, and Security Charges, ITC can be claimed if these services are used for the commercial property and are related to the business. The GST Act allows ITC on input services used in the course or furtherance of business. To summarize: - *ITC on GST Paid for Land Lease*: Can be claimed against GST payable on rent received, provided the land is used for business purposes. - *ITC on GST Paid for Building Maintenance*: Can be claimed if the services are used for the commercial property and are related to the business. Please consult a tax professional or chartered accountant to ensure compliance with the latest GST regulations and specific circumstances.

1.

Yes wed 10.10.24 rcm is applicable on lease service received from unregistered person.

Lease rent for land does not fall under "construction of immovable property", but is considered an input service for renting out the built property.

Since the lease rent is directly linked to taxable outward supply of renting commercial property, ITC on GST paid under RCM should be available.

2.

AMC for DG Set, Lift, Valet Parking Equipment: These are considered repair and maintenance expenses, which are not restricted under Section 17(5) of the CGST Act. You can claim itc.

1. ITC on GST Paid under RCM for Land Lease

A party taking land on lease and constructing a commercial property is eligible for Input Tax Credit (ITC) on GST paid under Reverse Charge Mechanism (RCM) for lease rent, provided the lease rent is used for business purposes and the commercial property generates taxable rental income.

As per the Orissa High Court decision in Safari Retreats Private Limited v. CC-CGST (WP(C) No. 20463 of 2018), ITC was allowed on GST paid for the construction of immovable property when the property is used for taxable supplies (i.e., renting out commercial property)​.

However, it is crucial to distinguish between:

• Land Lease for Construction: If lease rental is paid during the construction phase, ITC availability may be disputed under Section 17(5) of CGST Act, 2017.

• Land Lease for Running Business: If lease rent is for a developed property where taxable rental services are provided, ITC is eligible since the property is used for making taxable supplies​.

2. ITC on GST Paid for Building Maintenance (DG Set AMC, Lift AMC, Valet Parking Equipment AMC, and Security Charges under RCM)

As per GST provisions, ITC is available for maintenance-related expenses if the services are used for providing taxable supplies (e.g., commercial property rental).

• Building Maintenance (DG Set AMC, Lift AMC, Valet Parking Equipment AMC): ITC is allowed as these services are essential for the functioning of a commercial property and contribute to the taxable rental income​.

• Security Charges (under RCM): ITC can be claimed on GST paid under RCM for security services, provided the expenses are directly related to the taxable commercial property​.

Conclusion

• ITC on GST paid for land lease rent under RCM is available if the land is used for providing taxable rental services.

• ITC on building maintenance and security expenses is allowed, as these expenses contribute to the supply of taxable rental services.

• If the property is used partially for exempt supplies, ITC must be apportioned accordingly.

Yes, ITC on the RCM paid on the land lease is available:

• From 10 October 2024, renting of land (immovable property other than a residential dwelling) by an unregistered person to a registered person is under RCM at 18% (Notf 13/2017-CT(R), Entry 5AB, via Notf 09/2024).

• The land is used to make a taxable supply (renting out the commercial building at 18%), so ITC on the RCM tax is eligible under Sec 16. Sec 17(5)(d) blocks ITC on goods or services for construction of immovable property, not on a land lease rent used for an operating taxable rental business.

• Construction of the building itself: ITC on construction materials and works contract is blocked (Sec 17(5)(c)/(d)), even though the building is rented out (SC in Safari Retreats (2024) allowed ITC only if the building qualifies as "plant", a functionality test, and the 2025 retrospective amendment to Sec 17(5)(d) has since narrowed that).

• Pay RCM in cash (Table 3.1(d)), self-invoice within 30 days (Rule 47A), and claim it in Table 4A(3).

• If the landlord is registered, forward charge applies. The landlord bills GST, and you claim ITC normally.