{"id":3445,"date":"2026-11-13T18:00:48","date_gmt":"2026-11-13T12:30:48","guid":{"rendered":"https:\/\/khannaandassociates.com\/blog\/?p=3445"},"modified":"2026-11-13T18:00:52","modified_gmt":"2026-11-13T12:30:52","slug":"itc-on-godown-construction","status":"publish","type":"post","link":"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/","title":{"rendered":"Can a Partnership Firm Claim Input Tax Credit on Construction of a New Godown Used Only for Storage in 2026?"},"content":{"rendered":"\n<p>Can a partnership firm claim <strong><a href=\"https:\/\/www.khannaandassociates.com\/gst.html\">ITC on godown construction<\/a><\/strong> when the building is used only for storage? In most cases, no. Under Indian GST law, credit on goods and services used to build a warehouse is blocked, even when the godown is vital to your business. For traders and manufacturers in Jaipur and across Rajasthan, this can lock lakhs of rupees in tax you cannot recover. Foreign investors and NRI partners building storage in India face the same rule. This guide explains the 2026 position in simple English so you can plan before the first contractor invoice arrives. As a <a href=\"https:\/\/khannaandassociates.com\/\">law firm in Jaipur<\/a>, Khanna &amp; Associates advises partnership firms on GST structuring every day. Official return formats and notifications are available on the <a href=\"https:\/\/www.gst.gov.in\" target=\"_blank\" rel=\"noopener\">GST Portal<\/a>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"825\" height=\"1024\" src=\"https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z-825x1024.png\" alt=\"Godown\" class=\"wp-image-3446\" srcset=\"https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z-825x1024.png 825w, https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z-242x300.png 242w, https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z-768x953.png 768w, https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z-1237x1536.png 1237w, https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z-1650x2048.png 1650w, https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z-1200x1490.png 1200w, https:\/\/khannaandassociates.com\/blog\/wp-content\/uploads\/2026\/11\/Gemini_Generated_Image_8z2ze58z2ze58z2z.png 1856w\" sizes=\"(max-width: 709px) 85vw, (max-width: 909px) 67vw, (max-width: 984px) 61vw, (max-width: 1362px) 45vw, 600px\" \/><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_75 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#What_is_ITC_on_Godown_Construction_%E2%80%93_Complete_Definition_Overview\" >What is ITC on Godown Construction? \u2013 Complete Definition &amp; Overview<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#What_is_ITC_on_Godown_Construction_Simple_Global_Explanation\" >What is ITC on Godown Construction? (Simple Global Explanation)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#Legal_Framework_Regulations_in_India\" >Legal Framework &amp; Regulations in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#Key_Legal_Insights_Compliance_Rules_Benefits\" >Key Legal Insights, Compliance Rules &amp; Benefits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#Common_Mistakes_Legal_Challenges_Indian_Foreign_Clients\" >Common Mistakes &amp; Legal Challenges (Indian + Foreign Clients)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#Expert_Tips_from_Leading_Legal_Advisors\" >Expert Tips from Leading Legal Advisors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#Conclusion_CTA\" >Conclusion + CTA<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_ITC_on_Godown_Construction_%E2%80%93_Complete_Definition_Overview\"><\/span>What is ITC on Godown Construction? \u2013 Complete Definition &amp; Overview<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Input tax credit (ITC) lets a registered business deduct the GST it paid on purchases from the GST it collects on sales. This avoids tax on tax. However, the law blocks credit for certain purchases. Construction of a building is one of them. A godown is a civil structure, so GST paid on cement, steel, bricks and contractor services is generally not creditable. The <a href=\"https:\/\/www.cbic-gst.gov.in\" target=\"_blank\" rel=\"noopener\">CBIC GST portal<\/a> publishes the Act, rules and notifications. For wider guidance, see our <a href=\"https:\/\/www.khannaandassociates.com\/indirect-taxation.html\">indirect taxation<\/a> practice and <a href=\"https:\/\/khannaandassociates.com\/\">home page<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_ITC_on_Godown_Construction_Simple_Global_Explanation\"><\/span>What is ITC on Godown Construction? (Simple Global Explanation)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Imagine your firm collects 18% GST from customers and pays 18% GST to a builder. Normally you offset one against the other. For a warehouse building, you cannot. The tax paid becomes a cost. For example, a Jaipur partnership firm building a godown for \u20b91.2 crore with 18% GST on works contract pays about \u20b921.6 lakh in tax. In most cases, that amount cannot be claimed (illustrative figures).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Legal_Framework_Regulations_in_India\"><\/span>Legal Framework &amp; Regulations in India<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The core law is the CGST Act, 2017 and the Rajasthan GST Act, with Section 16 setting general eligibility. Section 17(5)(c) blocks credit on <strong><a href=\"https:\/\/www.khannaandassociates.com\/gst.html\">GST on works contract<\/a><\/strong> services for building construction. Section 17(5)(d) blocks credit on goods and services used for construction on \u201cown account\u201d, even in business. The explanation to Section 17(5) says \u201cplant and machinery\u201d excludes land, buildings and other civil structures. Our <a href=\"https:\/\/www.khannaandassociates.com\/indirect-taxation.html\">indirect taxation<\/a> and <a href=\"https:\/\/www.khannaandassociates.com\/taxation-direct-and-indirect-taxation.html\">taxation<\/a> teams handle these issues alongside <a href=\"https:\/\/www.khannaandassociates.com\/construction-legal-services.html\">construction and real estate<\/a> projects, <a href=\"https:\/\/www.khannaandassociates.com\/property-documentation.html\">property documentation<\/a>, <a href=\"https:\/\/www.khannaandassociates.com\/real-estate.html\">real estate<\/a> advisory, <a href=\"https:\/\/www.khannaandassociates.com\/contract-drafting.html\">contract drafting<\/a>, <a href=\"https:\/\/www.khannaandassociates.com\/corporate-compliance.html\">corporate compliance<\/a>, <a href=\"https:\/\/www.khannaandassociates.com\/corporate-documentation.html\">corporate documentation<\/a>, <a href=\"https:\/\/www.khannaandassociates.com\/deeds-and-documents-lawyer.html\">deeds and documents<\/a>, <a href=\"https:\/\/www.khannaandassociates.com\/dispute-resolution.html\">dispute resolution<\/a>, and support from <a href=\"https:\/\/www.khannaandassociates.com\/business-law.html\">business lawyers<\/a> and the <a href=\"https:\/\/www.khannaandassociates.com\/Best%20Tax%20Lawyers%20Jaipur.html\">best tax lawyers in Jaipur<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Legal_Insights_Compliance_Rules_Benefits\"><\/span>Key Legal Insights, Compliance Rules &amp; Benefits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul>\n<li><strong>Supreme Court, Safari Retreats (October 2024):<\/strong> the Court allowed a \u201cfunctionality test\u201d for \u201cplant\u201d under the old wording of clause (d).<\/li>\n\n\n\n<li><strong>Finance Act, 2025:<\/strong> Section 124 replaced \u201cplant or machinery\u201d with \u201cplant and machinery\u201d from 1 July 2017, nullifying that relief.<\/li>\n\n\n\n<li><strong>Recent rulings:<\/strong> the Gujarat Authority for Advance Ruling (January 2026) held ITC unavailable on a warehouse built for storage or leasing. The GSTAT Bengaluru bench reached a similar view for a resort building. Some taxpayers have challenged the retrospective amendment in High Courts, so check the latest status before filing.<\/li>\n\n\n\n<li><strong>What you can still claim:<\/strong> ITC on movable items such as racking, conveyors, forklifts and weighbridge machinery may qualify as plant and machinery, depending on facts. ITC on GST paid on rent for a leased warehouse is generally available when used for business.<\/li>\n\n\n\n<li><strong>Compliance:<\/strong> ITC wrongly taken must be reversed in GSTR-3B (Table 4(B)) with interest under Section 50.<\/li>\n\n\n\n<li><strong>Timelines:<\/strong> notices usually arise within the Section 73\/74 limitation periods, so keep construction records for years.<\/li>\n\n\n\n<li><strong>Cross-border use:<\/strong> foreign partners, NRI investors and exporters storing goods for export are bound by the same blocked-credit rule. A <strong><a href=\"https:\/\/www.khannaandassociates.com\/foreign-direct-investments.html\">foreign direct investment<\/a><\/strong> structure does not change it.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Common_Mistakes_Legal_Challenges_Indian_Foreign_Clients\"><\/span>Common Mistakes &amp; Legal Challenges (Indian + Foreign Clients)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ol>\n<li><strong>Claiming credit by calling the godown \u201cplant\u201d.<\/strong> Post-2025, this rarely survives scrutiny.<\/li>\n\n\n\n<li><strong>Mixing civil work and equipment<\/strong> in one invoice, which makes eligible ITC impossible to separate.<\/li>\n\n\n\n<li><strong>Weak records.<\/strong> Missing agreements, bill breakups and capitalisation entries invite notices.<\/li>\n\n\n\n<li><strong>Ignoring cross-border delays.<\/strong> Foreign partners often miss registration and approval timelines.<\/li>\n\n\n\n<li><strong>Late reversal.<\/strong> Interest builds up every month.<\/li>\n<\/ol>\n\n\n\n<p>Khanna &amp; Associates prevents these errors through pre-construction tax reviews, separate billing for eligible assets and clean contract drafting. We also defend clients before appellate authorities and the <strong><a href=\"https:\/\/www.khannaandassociates.com\/rajasthan-high-court.html\">Rajasthan High Court<\/a><\/strong> when notices arrive.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Expert_Tips_from_Leading_Legal_Advisors\"><\/span>Expert Tips from Leading Legal Advisors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ol>\n<li><strong>Plan before you build.<\/strong> Treat the blocked GST as project cost in your budget and financing.<\/li>\n\n\n\n<li><strong>Split the contract.<\/strong> Keep civil construction separate from racking, automation and machinery orders.<\/li>\n\n\n\n<li><strong>Compare rent versus own.<\/strong> Renting a warehouse can bring creditable GST, which may beat owning for some firms.<\/li>\n\n\n\n<li><strong>Review the partnership deed.<\/strong> Confirm which partner or entity owns the property and who bears tax cost.<\/li>\n\n\n\n<li><strong>Document for scrutiny.<\/strong> Maintain a fixed-asset register, invoices and engineer certificates.<\/li>\n\n\n\n<li><strong>Seek advice from an experienced firm.<\/strong> Clients searching for the <strong><a href=\"https:\/\/www.khannaandassociates.com\/Best%20Law%20Firm%20In%20jaipur.html\">best law firm in Jaipur<\/a><\/strong> or a <strong><a href=\"https:\/\/khannaandassociates.com\/\">top law firm in India<\/a><\/strong> should ask for written GST opinions, not verbal assurances.<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion_CTA\"><\/span>Conclusion + CTA<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>For a partnership firm, <strong>ITC on godown construction<\/strong> is generally blocked in 2026. Only qualifying plant and machinery, and rent on leased premises, usually give you credit. Planning early saves lakhs and avoids notices. Whether you are in Jaipur, Dehradun or abroad, get a clear written opinion before you build. <strong>Book a consultation today.<\/strong><\/p>\n\n\n\n<p><strong>Khanna &amp; Associates<\/strong><br>47 SMS Colony, Shipra Path, Mansarovar 302020, Jaipur, Rajasthan, India<br>\ud83d\udcde +91-9461620007 | \ud83d\udce7 <a href=\"mailto:info@khannaandassociates.com\">info@khannaandassociates.com<\/a><br>\ud83c\udf10 <a href=\"https:\/\/khannaandassociates.com\/\">khannaandassociates.com<\/a><\/p>\n\n\n\n<p><em>This article is general information, not legal advice. Rules and rulings change, so confirm the current position for your case.<\/em><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>1. Can a partnership firm claim ITC on construction of a godown?<\/strong><br>Generally no. Section 17(5)(c) and (d) of the CGST Act block credit on construction of immovable property, including warehouses, even when used in business. The Finance Act, 2025 reinforced this by excluding buildings and civil structures from \u201cplant and machinery\u201d from 1 July 2017.<\/p>\n\n\n\n<p><strong>2. Is ITC allowed if the godown is used only for storage?<\/strong><br>No. Storage use does not change the position. A godown is a civil structure, and the Gujarat AAR in January 2026 held credit unavailable on a warehouse used for storage or leasing. Always confirm facts with a tax professional.<\/p>\n\n\n\n<p><strong>3. Can I claim ITC on racking, conveyors and forklifts in my warehouse?<\/strong><br>Often yes. Movable equipment and machinery that is not part of the building structure may qualify as plant and machinery. Keep separate invoices for such items and record how each is installed and used.<\/p>\n\n\n\n<p><strong>4. What if I already claimed ITC on godown construction?<\/strong><br>Reverse it in GSTR-3B with interest under Section 50. Reversing early usually costs less than defending a demand notice later. A tax lawyer can review your return and assess whether any challenge to the amendment applies.<\/p>\n\n\n\n<p><strong>5. Is renting a warehouse better than building one for GST purposes?<\/strong><br>GST on warehouse rent is generally creditable when used for business, while construction GST is blocked. Compare lease cost against the lost credit before deciding. Consult a GST lawyer in Jaipur for a project-specific analysis.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Can a partnership firm claim ITC on godown construction when the building is used only for storage? In most cases, no. Under Indian GST law, credit on goods and services used to build a warehouse is blocked, even when the godown is vital to your business. For traders and manufacturers in Jaipur and across Rajasthan, &hellip; <a href=\"https:\/\/khannaandassociates.com\/blog\/itc-on-godown-construction\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Can a Partnership Firm Claim Input Tax Credit on Construction of a New Godown Used Only for Storage in 2026?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4025],"tags":[2973,9832,9845,9842,9843,9840,9835,9836,9841,9844,4001,9833,9838,9834,9839,9012,9837],"_links":{"self":[{"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/posts\/3445"}],"collection":[{"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/comments?post=3445"}],"version-history":[{"count":1,"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/posts\/3445\/revisions"}],"predecessor-version":[{"id":3447,"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/posts\/3445\/revisions\/3447"}],"wp:attachment":[{"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/media?parent=3445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/categories?post=3445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/khannaandassociates.com\/blog\/wp-json\/wp\/v2\/tags?post=3445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}