Claiming GST Input Tax Credit on Factory Repair Expenses
You can claim Input Tax Credit on factory repair costs if you treat them as revenue expenses rather than capitalizing them.
- Ruling
- Advance Ruling No. 08/AAR/2023 Dated: 06.06.2023
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- JK Fenner asked if GST on factory repairs is eligible for credit.
- The Authority ruled credit is allowed if costs are not capitalized.
- Capitalizing repairs blocks the Input Tax Credit under GST law.
- The decision relies on how the business records the expense.
In short
The company asked the Tamil Nadu Authority for Advance Ruling (AAR) if they could claim Input Tax Credit (ITC) on GST paid for factory building repairs. The core issue was whether these repairs count as 'construction'—which usually blocks tax credits—or as routine maintenance.
What has changed
How it worked before
Businesses were often unsure if repair work on factory buildings was considered 'construction' under GST law, which would automatically block them from claiming the tax paid on those services.
What has changed
The Authority clarified that if you record repair costs as revenue expenses in your books, they are not considered 'construction' under the law. This means you can claim the GST paid on these repairs as Input Tax Credit, provided you do not add the cost to the value of the building.
Who this affects
Manufacturing businesses and factory owners who regularly spend money on building maintenance and repairs.
An example
A textile mill spends five lakhs on roof repairs and records it as a maintenance expense. Because they did not add this cost to the building's value, they can claim the GST paid on the repair bill as credit. If they had added the cost to the building's value, the credit would be blocked.
What you should do
Review your accounting records to see how you treat repair expenses. Remember that an Advance Ruling only applies to the business that asked for it; your local tax officer is not legally bound by this decision and may still challenge your claim.
If you do nothing
If you claim credit on capitalized repairs, a tax officer may issue a notice to recover the amount with interest and penalties. Assuming this ruling applies to you without checking your own accounting treatment could lead to costly disputes during an audit.
The terms explained
- Input Tax Credit
- The tax a business pays on its purchases that it can use to reduce the tax it owes on its own sales.
- Capitalized
- Recording an expense as an asset on your balance sheet rather than as a day-to-day business cost.
- Works contract
- A service that involves both the supply of goods and labor, commonly used for construction or repair projects.
The ruling in detail
Authority for Advance Ruling
M/s J.K. FENNER (INDIA) LIMITED
Advance Ruling No. 08/AAR/2023 Dated: 06.06.2023 · Tamil Nadu
Questions before the authority
- Whether GST paid on works contract for carrying out repair of factory building shall be available for ITC to the extent to which the said expense is not capitalized to the said immovable property.
Facts
The applicant is engaged in the manufacturing of industrial rubber products and incurs regular expenditure on the repair and maintenance of its factory buildings. They sought a ruling on whether Input Tax Credit (ITC) is available for GST paid on works contract services for these repairs when the expenses are treated as revenue expenditure and not capitalized in their books of account.
Ruling
| Question | What the authority ruled |
|---|---|
| Availability of ITC on works contract for factory building repairs | Available to the extent the expense is not capitalized Subject to the provisions of Section 16(1) and Section 17(5) |
The Authority ruled that the applicant is entitled to claim ITC on GST paid for works contract services used for the repair of existing factory buildings, provided the expenses are not capitalized. This entitlement is subject to the provisions of Section 16(1) and the restrictions under Section 17(5) of the CGST Act.
Reasoning
The Authority relied on the explanation to Section 17(5) of the CGST Act, which defines construction to include repairs only to the extent of capitalization. Since the applicant treats these specific repair expenses as revenue expenditure rather than capital expenditure, the bar on ITC under Section 17(5)(c) and (d) does not apply. The ruling emphasizes that the eligibility for ITC is contingent upon the accounting treatment of the expenses as non-capitalized revenue items.
Provisions relied on
- Section 2(119) of the CGST Act, 2017
- Section 16(1) of the CGST Act, 2017
- Section 17(5) of the CGST Act, 2017
For the practitioner
This ruling provides **favorable clarity** for manufacturers seeking to claim ITC on routine factory maintenance and repair works. It confirms that if such expenses are **not capitalized** in the books of account, they fall outside the scope of the blocked credit provisions under Section 17(5). Practitioners should note that the ruling is fact-specific and relies on the applicant's accounting treatment of the expenses.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/08_aar_2023_jk_fenner_order_1.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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