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Credit of gst on interior designing, architect fees

Nishant shah (AUDIT ASSISTANT) (302 Points)

04 April 2019

Whether can I get GST credit on Professional bill issued by Architecture toward approval and completion of design drawing charges

in office??

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24 Replies

CA Himanshu Gandotra (Chartered Accountant) (1160 Points)
Replied 04 April 2019

Nishant, according to me if these are only drawing charges and nothing is going to be capitalised in building acclunt then input credit can be taken...

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Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 04 April 2019

Hello Nishant,

Below is the extract of Section 17(5)(c) and 17(5)(d) which covers your case whether covers under blocked credit or not. Section 17(5)(d) covers any goods/service received for construction (incl.re-construction, renovation, additions or alterations) of immovable property. Since architect's services for design and drawing is ultimately meant for renovation/construction office, same would not be allowed as eligible credit.

(c)		works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d)		goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
		Explanation.—For the purposes of clauses (c)and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

Thanks and Regards,

Manoj B. Gavali

Nishant shah (AUDIT ASSISTANT) (302 Points)
Replied 04 April 2019

Manoj Sir,

Architecture has provided professional invoice and he has charged for designing and drawing and i think

it falls under different SAC in GST other than construction that covers u/s 17(5)

So, don;t you think that credit should be allowed ignoring 17(5)

Nishant shah (AUDIT ASSISTANT) (302 Points)
Replied 04 April 2019

Please any one has fair & reasonable interpretative answer are suggested to provide it because here there in no case of

capitalization rather professional service is provided and TDS is also deducted from his payment. & I availed his services

in the course or furtherance of business

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 04 April 2019

Hi Nishant,

As per general accounting principles, all cost including services associated with construction of asset has to be capitalised and hence, charges need to be part of your fixed asset. Even if you show the same as part of expenses in P&L, department may take a stand that since this expenses out to be capitalised in first place and hence covered by section 17(5)(d).

Further, SAC code is meant for classification of services for internal statistical purpose at government end and same cannot be used to check Section 17(5) applicability. If this was the intention, then they may have been specified SAC codes directly in 17(5) itself instead of service descripttion.

Thanks and Regards,

Manoj B. Gavali

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CA Himanshu Gandotra (Chartered Accountant) (1160 Points)
Replied 04 April 2019

Sir, credit is blocked only in case of work contract. And as you see definition of work contract, it says “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.” As per above definition if nothing is formed part of immovable property by way of capitalisation, it will be considered as business expense and thus itc is available.

Nishant shah (AUDIT ASSISTANT) (302 Points)
Replied 04 April 2019

Exacltly, I agree with you Sir since this is not case of immovable property construction or else any kind of alteration..

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 04 April 2019

Hi Himanshu,

Works contract credit disallowance covered by section 17(5)(c). I am talking about section 17(5)(d) which is not for works contract. You can see my first reply for extract of both the clauses.

Thanks and Regards,

Manoj B. Gavali

Nishant shah (AUDIT ASSISTANT) (302 Points)
Replied 04 April 2019

Himanshu Sir, but in my case it is not any kind of construction rather this service comes after all immovable property is constructed and in our existing building

if we do any kind of interior then how can it be said part of construction?

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 04 April 2019

Originally posted by : Nishant shah
	Exacltly, I agree with you Sir since this is not case of immovable property construction or else any kind of alteration..

Hi Nishant,

Please read section carefully as it says any goods/services used for construction of immovable property. Section provides meaning of construction as explanation to main section and it doesn't only includes construction we talk in general sense. So all services used directly or indirectly attributable to construction of service is covered by the provision.

Thanks and Regards,

Manoj B. Gavali

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Nishant shah (AUDIT ASSISTANT) (302 Points)
Replied 04 April 2019

and in it is specifically mentioned that where there is transfer of property in goods is involved which is not in present scenario

CA Himanshu Gandotra (Chartered Accountant) (1160 Points)
Replied 04 April 2019

But sir, this is not repair or renovation. What i am understanding it is a mere designing service like design on walls and that cannot be considered as works contract. It is a mere professional service. Rest i think there is need of nofe clarification on this from department.