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:
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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.
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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).
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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.
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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
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ITC on GST paid for land lease rent under RCM is available if the land is used for providing taxable rental services.
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ITC on building maintenance and security expenses is allowed, as these expenses contribute to the supply of taxable rental services.
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If the property is used partially for exempt supplies, ITC must be apportioned accordingly.
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