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2020 ] ADMISSIBILITY OF ITC — CONSTRUCTION OF WAREHOUSE FOR LETTING OUT J13
view of Section 16 of the CGST Act as well as SGST Act and to avoid
the cascading effect of various input taxes, the firm being a regis-
tered dealer is statutorily entitled to avail of the benefit of taking
credit of the input tax charged on the supply of goods and various
services which are consumed or utilized for the construction of the
aforesaid warehouse and set off the same against, the CGST and
SGST payable on the rentals received as there is no break in the
supply chain of applicant and the receipt of rentals and the tax pay-
able thereon are the direct and inexorable consequence of the con-
struction of the warehouse and the payment of the GST on the input
goods and services which have been consumed and utilized for the
construction of the warehouse. If the assessee is required to pay
GST on the rental income arising out of the investment on which he
has paid GST, it is required to have the input credit on the GST
which is required to pay under Section 17(5)(d) of the GST Act.
(ii) That as per the Section 17(5), it is clear that what it contemplates
and provides for is a situation where inputs are consumed in the
construction of an immovable property which is meant and intend-
ed to be sold. The sale of immovable property post issuance of
completion certificate does not attract any levy of GST. Consequent-
ly, in such situation, there is a break in the tax chain and therefore
there is full justification for denial of input tax credit as on the com-
pletion of the transaction, no GST would at all be payable and,
therefore, no set-off of the input tax credit would be required or
warranted or justified. But the position is totally different where the
immovable property is constructed for the purpose of letting out the
same, because, in that event the tax chain is not broken and on the
contrary the construction of building will result in a fresh stream of
GST revenues to the exchequer on the rentals generated by the
building. The denial of input tax credit in such a situation would be
completely arbitrary, unjust and oppressive and would be directly op-
posed to the basic rationale of GST itself, which is to prevent the cascad-
ing effect of multi-stage taxation and the inevitable increase, in costs
which would have to be borne by the consumer at the end of the
day.
(iii) That interpretation of Section 17(5)(d) that the ITC not allowed
leads to double taxation, i.e. firstly, on the inputs consumed in the
construction of the building and secondly, on the rentals generated
by the same building. It is also a settled principle of interpretation of
tax statutes that interpretation should be adopted which avoids or
obviates double taxation. This principle is also directly applicable to
the present case. It would also be violative of the applicants funda-
mental right to carry on business under Article 19(1)(g) of the Con-
stitution as it would be a wholly unwarranted and unreasonable
and arbitrary restriction which would render building now con-
structed for renting out uncompetitive, by consumed (sic) in the
construction and, thereafter on the rentals generated by the ware-
house. It is therefore, submitted that, in accordance with well settled
principles of interpretation of unconstitutionality, by confining the
provision to cases where the building in question is constructed for

GST LAW TIMES  3rd September 2020  47