GST AAAR: Work Contract for Housing Society Not Eligible to Claim ITC

As per a recent ruling from the Maharashtra Appellate Authority of Advance Ruling (AAAR), the housing society is ineligible to claim ITC on contract services acquired from their designated contractor. This is due to the ineligibility of housing societies to claim ITC on repairs, rehabilitation and renovation work.

A two-member bench comprising Ashok Kumar Mehta and Rajeev Kumar Mittal observed that the society itself is not a works contract service provider, nor is it in the business of providing works contract services. The contract services obtained from the contractors appointed by the Society are for the general benefit of the members.

According to the Maharashtra State Co-operative Societies Act, 1960, the appellant is a cooperative housing society. On the MHADA-allocated plot, the appellant society built a building. It charges its members with property tax, car parking charges, general electricity charges, water charges, contribution to repair and maintenance fund, expenses for repair and maintenance of lifts of the society, service charges, etc.

The appellant has asked for an advance ruling on the matter of whether the applicant is qualified to claim ITC or not on the inputs and input services of renovation, repair, and rehabilitation works performed by the applicant.

The AAR determined that, in light of the limitations established by section 17(5)(c) of the CGST Act of 2017, the appellant society is not eligible for GST ITC.

According to the appellant, the appellant society ought to be able to claim ITC on the inputs and input services obtained. For the GST collected by M/s. Unique Rehab Pvt. Limited, the appellant may make an ITC claim.

According to the appellant’s interpretation of Section 16(1), every registered person is entitled to claim a credit for any input tax paid on the supply of any goods or services, or both, that are used, are being used, or are intended to expand the business. The claimed amount is to be credited to the registered person’s electronic credit ledger.

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The exception created to offer ITC in the event of tax paid on works contracts is for those who in turn supply works contract service, according to the AAAR, which upheld the AAR’s decision. For instance, even though a contract results in immovable property, a principal can qualify for ITC if they obtain a contract of work from a subcontractor and give it to the employer. The appellant society, on the other hand, is a group that was established with the specific purpose of managing, maintaining, and administering the society’s property as specified in the bye-law and offering the services listed in the bye-law.