ITC Available On Interior Furnishing Of Rented Shops Where Tax Aspect Is Not Capitalized: GSTAT Thiruvanathapuram

The Goods and Services Tax Appellate Tribunal (GSTAT), Thiruvananthapuram Bench, has allowed Oxygen The Digital Shop to claim ₹11.23 lakh in Input Tax Credit (ITC) on carpentry, joinery and painting services used for interior work at its rented shops.

It held that the GST component was not capitalised in the retailer's books of accounts.

“Since the amount of GST is not capitalised, such amount of tax does not get covered under the restricted category of Section 17(5)(d),” the tribunal ruled.

The Division Bench comprising Vice President Subramanya Rayaprol and Technical Member Ramamoorthi Sriram was hearing the retailer's appeal against the denial of ITC on four invoices for interior work at its showrooms.

Oxygen The Digital Shop, a partnership firm engaged in selling and repairing digital gadgets, had rented commercial premises at Vellayambalam and Nedumangadu. It hired a service provider to carry out interior furnishing work, including installing wooden and glass shelves to store and display digital goods.

The GST authorities denied the credit, arguing that the carpentry and painting services fell under building completion and finishing services. They contended that the credit was restricted under Section 17(5) of the Central Goods and Services Tax Act, 2017.

The retailer argued that the shelves and display units were movable and detachable items installed for its business. It also produced a Chartered Accountant's certificate confirming that the furnishing expenditure had been capitalised under “Furniture and Fixtures”. However, the GST component was excluded from the cost of those assets and accounted for separately as ITC. The certificate confirmed that no depreciation had been claimed on the GST amount.

The tribunal observed that the services were used to install wooden and glass shelves for storing and displaying digital goods for retail sale. Since the work was directly connected with the furtherance of the retailer's business, it held that ITC was available under Section 16(1) of the CGST Act.

Section 17(5) restricts ITC on certain expenses relating to the construction of immovable property, including renovation, additions and alterations, to the extent they are capitalised.

The tribunal found that the GST component of the four invoices had not been capitalised. It relied on the Chartered Accountant's certificate, which confirmed that the tax amount was excluded from the cost of the fixed assets and that no depreciation had been claimed on it.

The four invoices carried Central GST of ₹5.61 lakh and State GST of ₹5.61 lakh, taking the total disputed credit to ₹11.23 lakh.

The tribunal set aside the Joint Commissioner's order denying the credit and allowed the appeal with consequential relief.

For Appellant: Advocate Aji V. Dev appeared

For Revenue: Mansur M.I., Joint Commissioner