ITC Eligibility for Factory Building Repairs Without Capitalization, Confirms AAR

• M/s J.K. FENNER (INDIA) LIMITED, a GST-registered entity, sought an Advance Ruling on the availability of GST Input Tax Credit (ITC) for works contracts related to repairing their factory building, provided the expenses are treated as revenue in nature and not capitalized.

• The applicant is engaged in manufacturing various products, including transmission rubber belts and oil seals, and constantly incurs expenses for factory building repairs to ensure continuous production.

• Section 17(5) of the CGST/TNGST Act, 2017, specifies that ITC is not available for works contract services supplied for the construction of immovable property (other than plant and machinery) unless it is an input service for further supply of works contract service. It also blocks ITC for goods or services received for constructing immovable property, including repairs, to the extent of capitalization.

• The Applicant argued that ITC is still available for factory building repairs to the extent that the expenses are not capitalized.

• The Assistant Commissioner stated that claiming ITC for factory building repairs was legally ineligible, as such expenses did not relate to the course or furtherance of business and were categorized as Blocked Credit under Section 17(5)(c) of the TNGST Act 2007.

• The Applicant provided a detailed explanation of the distinction between capital and revenue expenses as per accounting standards, highlighting that repairs and maintenance expenses were treated as revenue.

• The GST Authority examined the Applicant's submissions, purchase/work orders, and accounting documents. It noted that the documents did not specify which part of the factory building was repaired, and the actual treatment of expenses could only be determined upon finalizing their accounts.

• The Advance Ruling stated that the Applicant was eligible for ITC on goods and services related to factory building repairs, provided the expenses were not capitalized in their accounts.

• In conclusion, the ruling confirmed the availability of ITC for non-capitalized factory building repair expenses. AUTHORITY FOR ADVANCE RULINGS, TAMILNADU J.K. Fenner (India) Ltd