No ITC is available on construction, reconstruction, renovation, addition, alteration or repair of an immovable property

Categories: Advance Ruling
No Comments

Facts:

M/s Rambagh Palace Hotels (P.) Ltd. (“the Applicant”) is a five-star deluxe heritage hotel engaged in hospitality business operated under the brand name ‘Taj Group’. Up-keep and maintenance of hotel building, equipments, electrical installation, Furniture and Fixtures and other infrastructures is crucial for continuity of its business.

Expenses being routine in nature, the amount spent on the above-mentioned scenarios are charged to revenue as per Accounting Standards.

Questions on which Advance Ruling is sought:

1. Whether ITC is available on expense made on:

  • Building materials such as cement, concrete, brick etc. meant for repair of building
  • Electrical fittings and sanitary fittings meant for repair of existing electrical and sanitary fittings
  • Repair of existing furniture and fixtures
  • New ready-to-use furniture such as Chairs etc.

2. Whether ITC is available on labour supplies received for carrying out above services?

3. Whether it makes any difference if aforementioned works are carried out in a composite manner?

Observation and findings:

Nature of work undertaken, is predominantly for immovable property involving transfer of goods and services, therefore the activity is works contract for carrying out repair and maintenance work.

In general, ITC is not available on construction, reconstruction, renovation, addition, alteration or repair of an immovable property even when such goods or services or both are used in course or furtherance of business. However, the limitation in such a scenario is extent of capitalization.

The applicant is paying GST on wood, board, mica, tapestry, paint, polish and other consumables meant for repair of existing Furniture and Fixtures such as sofa, table, chair, door, cabinets etc. ITC shall be available on such expenditure, as in the case of the Applicant, these expenditures are not made in relation to immovable property.

Held:

The AAR, Rajasthan vide Advance ruling no. RAJ/AAR/2019-20/05 dated April 30, 2019 held that in case of building repair works, electrical fittings and sanitary fittings, ITC shall not be available to the extent of capitalization of building materials and labour supply. ITC shall not be available to the extent of capitalization, even though such services are carried out in a composite manner. In case of Furniture & Fixture repairing works, ITC shall be available on all short of expenditure made in relation to Furniture and Fixture i.e. repairing, labour and procurement.

Citation: [TS-344-AAR-2019-NT]