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ITC on construction expensesand warehouses

04 October 2024

Post 3 Oct 2024 judgement -SC allows claiming ITC on construction expenses; we are having tea gardens and associated warehouses. Whether warehouse construction related expenditure would entitle to ITC. Please advise.

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4 Replies

Radhey Shyam Jha (Student) (1616 Points)
Replied 04 October 2024

Kindly read the complete judgement, you will find the right answer

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Jayanta Bandyopadhyay (301 Points)
Replied 04 October 2024

Not clear.

Since read 91 pages.

Hence sought experts opinion.

sabyasachi mukherjee (27529 Points)
Replied 04 October 2024

Input tax credit is available provided that construction is used for the purpose of business.

Khushbu Bansal (student) (48 Points)
Replied 04 October 2024

Applicability of ITC for Warehouse Construction Expenses

Warehouse as an Immovable Property:
- The construction of a warehouse is considered an immovable property under GST law.
- However, if the warehouse is used to store goods that are part of your taxable supply chain (e.g., tea), ITC on construction-related expenses may be claimed.
Connection to Business Activities:
- For claiming ITC, the warehouse must be directly linked to your business activities that result in taxable outward supplies.
- Since your tea business and associated warehouses are used for storing goods (tea) for further sale and supply, this connection makes the warehouse construction eligible for ITC.
Supreme Court Ruling:
- The recent Supreme Court ruling allows ITC on construction expenses where the immovable property (like a warehouse) is used in business activities that lead to taxable outputs.
- Thus, if the warehouse is integral to your tea business (which involves taxable supplies), you can claim ITC on the goods and services used in constructing the warehouse.

Conditions for Claiming ITC

Taxable Output: The warehouse must be used in relation to the taxable supply of goods (e.g., storing tea before sale).
Proper Documentation: Ensure that the construction invoices and related expenses are well-documented and clearly show their connection to business activities.
Proportionate ITC: If the warehouse is also used for non-business or exempt supplies, you may need to calculate ITC on a proportionate basis.
Timing of ITC Claim: The claim for ITC on construction should be made in the tax period in which the tax invoice is received or in subsequent periods, but not beyond the prescribed limit.