Centre explores easing GST credit restrictions on self-use construction

The Centre is examining a potential relaxation of Goods and Services Tax rules that currently block input tax credit on construction activities undertaken for self-use assets, officials said. The move comes as industry representatives have flagged concerns that the denial of such credits substantially increases the cost of major investment projects across sectors.

Under current GST rules, businesses cannot claim input tax credit on construction services when the resulting asset is intended for personal or non-business use. This has prompted questions from large corporations and infrastructure developers, who argue that the restriction places an unnecessary financial burden on capital-intensive projects.

Government discussions with state authorities indicate a willingness to reconsider the framework governing input tax credit eligibility. Officials have acknowledged that the restriction may inadvertently discourage investment in fixed assets and infrastructure development, which are critical for economic growth.

The Centre has sought state-level feedback on potential amendments to GST credit provisions, though no timeline for policy changes has been announced. Any modification would require consensus among state finance ministers through the GST Council, the apex decision-making body for indirect tax matters in India.

The issue highlights the broader challenge of balancing tax revenue collection with the need to promote capital investment and economic activity across the country.