Input tax credit removal set to hit commercial real estate companies
MUMBAI: Availability of credit for taxes paid on inputs - be it goods, such as raw material, or services for setting off against Goods and Services Tax (GST) liability plays an important role in the GST arena. Input tax credit (ITC) helps reduce the tax outgo for the GST payer.
A retrospective amendment, which comes into effect from July 1, 2017, debars entities, such as commercial real estate companies from claiming ITC on construction costs for their rental buildings.
Rohit Jain, deputy managing partner, at Economic Laws Practice said, "The proposed amendment restricts the eligibility of ITC of goods and services used for construction of immovable property on 'one's own account', such as building, warehouses and any other civil structure. The amendment has a significant impact on hospitality and commercial leasing activities."
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