Can I save gst or any other tax on making a commercial building , if I make it under my company ( yet to be formed ) vs making it as an individual?

[kirtibhushan]

I have an commercial land in my name.
I plan to make a commercial building on it and lease it to bank.
I wish to know if I make it under the name of a company , will I be able to save on gst , vis a vis if I make it under my individual name ?
I haven't formed a company yet but just exploring this idea to bring the cost of construction down.
Pls advise.

 

[TaxWiser]

I have an commercial land in my name.
I plan to make a commercial building on it and lease it to bank.
I wish to know if I make it under the name of a company , will I be able to save on gst , vis a vis if I make it under my individual name ?
I haven't formed a company yet but just exploring this idea to bring the cost of construction down.
Pls advise.

Constructing a commercial building under a company name versus an individual name can have several implications, especially regarding GST and other financial aspects. Here are some key points to consider:

Benefits of Constructing Under a Company Name
1. GST Input Tax Credit (ITC):

• Eligibility: Companies can claim Input Tax Credit (ITC) on GST paid for construction materials and services, which can significantly reduce the overall cost of construction¹.
• Offsetting GST: The ITC can be used to offset the GST liability on rental income, reducing the effective tax burden¹.

2. Tax Benefits:

• Depreciation: Companies can claim depreciation on the building, which can reduce taxable income¹.
• Deductions: Certain expenses related to the construction and maintenance of the property can be deducted as business expenses¹.

3. Liability Protection:

• Limited Liability: Owning the property through a company provides limited liability protection, meaning personal assets are protected in case of legal issues¹.

4. Ease of Financing:

• Loan Eligibility: Companies may find it easier to secure loans for construction and other business activities¹.

Considerations for Constructing Under an Individual Name
1. GST Implications:

• No ITC: Individuals cannot claim Input Tax Credit on GST paid for construction materials and services¹.
• Higher Effective Cost: Without ITC, the effective cost of construction may be higher¹.

2. Taxation:

• Personal Tax Rates: Rental income will be taxed at personal income tax rates, which may be higher than corporate tax rates¹.
• Limited Deductions: Individuals have fewer options for claiming deductions related to construction and maintenance expenses¹.

3. Liability:

• Personal Liability: Owning the property in your name means you are personally liable for any legal issues or debts related to the property¹.

Conclusion
Forming a company to construct and lease the commercial building can offer significant financial and legal benefits, including GST savings, tax deductions, and liability protection. However, it's important to consult with a tax professional or financial advisor to understand the specific implications for your situation and to ensure compliance with all regulations.

Hope this helps


(Source: Conversation with Gemini AI)
¹: [The Pros and Cons of Owning Property in Your Personal Name vs. LLC] by gcrealtyinc blog