GST on Property: 5 ITC Rules Your Business Must Know

If your business bought or built property and claimed GST input tax credit, you may be breaking the law. Section 17(5) blocks ITC on most immovable property — but there are exceptions most business owners don't know about.

Here's what happened: Section 17(5) of the CGST Act blocks input tax credit on goods and services used to construct immovable property, even when the property is used entirely for taxable business purposes.. A critical exception exists for 'plant and machinery' — structures that qualify as plant under GST law may still be eligible for ITC, but the test is strict and case-specific.. Works contracts for constructing immovable property are also blocked from ITC, exposing contractors and business owners who misclassify their construction agreements to large tax demands..

What you should do: Review any GST ITC already claimed on office, warehouse, or commercial building construction — wrongly claimed credit attracts 24% annual interest plus an equal penalty.. Check whether your heavy equipment or built-in machinery qualifies as 'plant and machinery' under GST before blocking or claiming ITC — get a written tax opinion.. Restructure construction contracts with your vendors to separate movable plant supply from civil works, so the eligible portion of ITC can be legally claimed..

If your factory's cold storage or industrial furnace is built into the structure but functions as plant, you may still claim ITC — document the technical specs showing it is plant, not civil construction.

For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.