Itc of immovable property

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neer maru (Querist)
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04 June 2018 Sir/Madam,
I have purchased an under construction Flat and am paying GST @12% on it. I also have rental income from another property and am registered under GST. Can i take Set off of gst on new property and adjust it with current rental income. If not, can i use the same GST ITC for set off of Rent income that may arise in the future from the new property?

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CA Padmasri Manyam

CA Padmasri Manyam (Expert)
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04 June 2018 GST paid on purchase of new flat is in the nature of inward supply of works contract. Input tax credit on works contract is allowed only if your outward supply is works contract.
You are providing rental services (whether from new flat or another property). Hence, you are not eligible for input tax credit of GST paid on purchase of new flat.

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neer maru

neer maru (Querist)
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04 June 2018 Thanks for your reply! Agreed. But isnt it wrong to block that credit since rental income can only be generated if a property is purchased. The nexus of ITC is so direct.

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CA Padmasri Manyam

CA Padmasri Manyam (Expert)
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04 June 2018 You are right. Logically they should have allowed credit if the same is used for furtherance of business. But unfortunately, they have not allowed.

Same position was there even under service tax law in case of hotels if they buy any property no Cenvat credit is allowed even if they used that busing for providing hotel services.