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TMI BlogITC on Factory buildingX X X X Extracts X X X X X X X X Extracts X X X X ..... Respected experts, My query is in relation to ITC u/s 17(5) . One of my client is giving contract to build a factory. He is letting out this factory on monthly rent basis. I have 2 queries - 1) whether the contractor can claim ITC on inputs he purchased to build the factory? (Later the contractor will bill for the building construction). 2) Whether contractee i.e, my client will be eligible to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im ITC on what contractor has billed as he is going to let out the factory building on monthly rent basis? - Reply By Sadanand Bulbule - The Reply = Dear Venkatesh The matter related to your query stands well settled. Please peruse discussion ID No. 115652 dated 11/11/2019 for experts' views. - Reply By Venkatesh Dhongadi - The Reply = Sir What about the contractor. Whether contractor can clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m ITC? - Reply By Sadanand Bulbule - The Reply = Dear Venkatesh As long as the supply of construction services fall under the definition of Works Contract ,the contractor is entitled for ITC. - Reply By Shilpi Jain - The Reply = Contractor can claim ITC. Your client - take and wait for the decision of the SC. Can consider reversing under protest or not utilising also. - Reply By Amit Agrawal - The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reply = Please note Apex Court ruling dated 03.10.2024 in case of M/s Safari Retreats Pvt. Ltd. -2024 (10) TMI 286 - SUPREME COURT , wherein it is ruled as follows: 65. Some of our conclusions can be summarised as under: a. The challenge to the constitutional validity of clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act is not established; b. The expression plant or machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in Section 17(5) (d) cannot be given the same meaning as the expression plant and machinery defined by the explanation to Section 17 ; c. The question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression plant or machinery used in Section 17(5)(d) is a factual question which has to be determined kee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping in mind the business of the registered person and the role that building plays in the said business . If the construction of a building was essential for carrying out the activity of supplying services, such as renting or giving on lease or other transactions in respect of the building or a part thereof, which are covered by clauses (2) and (5) of Schedule II of the CGST Act , the building co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be held to be a plant. Then, it is taken out of the exception carved out by clause (d) of Section 17(5) to sub-section (1) of Section 16 . Functionality test will have to be applied to decide whether a building is a plant. Therefore, by using the functionality test, in each case , on facts, in the light of what we have held earlier, it will have to be decided whether the construction of an imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovable property is a plant for the purposes of clause (d) of Section 17(5) . 66. In the light of what we have held above, by setting aside the impugned judgment in Civil Appeal Nos. 2948 and 2949 of 2023 , the writ petitions are remanded to the High Court of Orissa for limited purposes of deciding whether, in the facts of the case, the shopping mall is a plant in terms of clause (d) of Section 17( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) . Appeals are partly allowed in above terms. 67. While deciding these cases, we cannot make any final adjudication on the question of whether the construction of immovable property carried out by the petitioners in Writ Petitions amounts to plant, and each case will have to be decided on its merit by applying the functionality test in terms of this judgment. The issue must be decided in appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate proceedings in which adjudication can be made on facts. The petitioners are free to adopt appropriate proceedings or raise the issue in appropriate proceedings. These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Amit Agrawal - The Reply = I am of the view that Apex Court has made it simpler to take ITC agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t goods / services used in construction of 'Shopping Mall / Warehouse / Commercial Buildings / Factory to be given on lease / rental / license'. This can be more complicated for 'Income Tax Purpose' ( as depreciation related provisions for building plant are different with different objectives etc. ). But, for GST purpose, this will be relatively simpler. All such tax-payer needs i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to involve expert consultant to guide. It would be much better to get such an expert during building construction stage itself as well as before entering into lease / rental / license agreements. This in-turn will help tax-payer to prove eligibility of ITC against goods / services used in construction of those buildings using 'functionality' test. These are ex facie views of mine and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same should not be construed as professional advice / suggestion or recommendation. - Reply By deepak gulati - The Reply = Even this Apex court ruling will have huge implications if we consider building as plant or Machinery. As whenever TP will sell same he has to discharge GST. Considering the appreciation in Building, the GST charge will be much more than what is saved. Also, the buyer, at tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t time, may or may not get input of same and this will have significant impact on price. - ITC on Factory building - Query Started By: - Venkatesh Dhongadi Dated:- 20-9-2024 Last Replied Date:- 8-10-2024 Goods and Services Tax - GST - Got 7 Replies - GST - Discussion Forum - Knowledge Sharing, reply post by an expert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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