Appellant not eligible for ITC of GST paid on works contract service for payment of Output GST on Renting of property: AAAR

The Telangana State Appellate Authority For Advance Ruling (AAAR Telangana) has upheld the ruling by the Telangana Authority For Advance Ruling (AAR Telangana) that the appellant is not eligible to take an input tax credit (ITC) of GST paid on the supply of works contract service for payment of GST on their output service i.e., Renting of immovable property.

Appeal filed by Shri Satya Dev Bommireddy, Villa 33, Lalitha Bloomfield, Khajaguda, Nanakramguda Rd, Hyderabad 500008 under Section 100 (1) of TGST Act, 2017 against Advance Ruling TSAAR Order No.21/2021.

The lower authority, examined the submissions made by the Appellant and Vide the impugned order, the Advance Ruling Authority had given the following advance rulings:

Question Raised:

1. Given that the supply of under construction of immovable property is specifically defined as a separate and distinct service under clause 5(b) of Schedule II of CGST Act, can the same be treated to be referring to either the supplies or transactions described in 17(5)(c) or 17(5)(d) of CGST?

2. Given that the supply of lease of immovable property is specifically defined as a separate and distinct service under clause 2(b) of Schedule II of CGST Act, can the same be treated to be referring to either the supplies or transactions described in 17(5)(c) or 17(5)(d) of CGST?

3. Given that the Applicant is in the business of lease of immovable property, does the term “works contract services when supplied for” in s.17(5)(c) of CGST Act refer to output supply of lease of immovable property or to the input receipt (purchase of under construction commercial immovable property) of the Applicant?

4. Is supply of “under construction commercial immovable property” under an indivisible contract without explicit purchase of goods and/or services therein, a contract of “works contract” within the meaning of s.17(5)(c) of CGST Act?

5. Does the term “Goods or Services or both received” in s.17(5)(d) of CGST Act refer to output supply (lease of immovable property) or to the input receipt (purchase of under construction commercial immovable property) of the taxable person (Applicant)?

6. Does the term “for construction of an immovable property on his own account” in s.17(5)(d) of CGST Act refer to output supply (lease of immovable property) or to the input receipt (purchase of under construction commercial immovable property) of the taxable person (Applicant)?

7. If the term “Goods or Services or both received” in s.17(5)(d) of CGST Act refer to input received, then can the meaning of the term “for construction of an immovable property on his own account” in s.17(5)(d) of CGST Act include the business of the Applicant herein, i.e. for the lease of immovable property?

Advance Ruling Issued:

1. Clause 5(b) of Schedule II and Sec 17(5)(c) are two different and distinct provisions of CGST Act, 2017.

2. Clause 2(b) of Schedule II and Sec 17(5)(c) are two different and distinct provisions of CGST Act, 2017.

3. Sec 17(5)(c) is enacted with reference to restriction of ITC to works contract services. Works contract is defined under Sec 2(119).

4. Sec 17(5)(c) of CGST Act, 2017 pertains to all transactions defined under Sec 2(119).

5. Sec 17(5)(d) of CGST Act, 2017 refers to inputs on which ITC is not available for any taxable person.

6. Sec 17(5)(d) of CGST Act, 2017 refers to inputs on which ITC is not available for any taxable person.

7. If the applicant utilizes goods or services or both for construction of immovable property on his own account then the Sec 17(5)(d) is applicable with respect to purchase of goods or services or both.

Now, Current appeal by assess is upheld by Advance Ruling Authority and passed the following order:

The appellants are not eligible to take input tax credit of GST paid on supply of works contract service for payment of GST on their output service i.e., Renting of immovable property.

The subject appeal is disposed accordingly

For Official Ruling Download PDF Given Below: