Immovable property test for warehouse structures defeats input tax credit under blocked-credit rules

Pre-engineered warehouse structures with foundation, concrete base and permanent annexation were treated as immovable property because their erection showed sufficient attachment to the earth and enduring business use, even though they were prefabricated and capable of dismantling. Input tax credit was denied because the procurement was for construction of immovable property on own account, bringing the blocked-credit restriction into play. Recording the items as plant and machinery did not override the statutory bar.

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Issues: (i) Whether pre-engineered structures erected for warehouse use are movable property or immovable property for GST purposes. (ii) Whether input tax credit is available on such structures or is blocked under the provision relating to construction of immovable property.

Issue (i): Whether pre-engineered structures erected for warehouse use are movable property or immovable property for GST purposes.

Analysis: The relevant test was whether the structure was attached to the earth or permanently fastened to anything attached to the earth. The foundation, concrete base and large warehouse structure were found to have the necessary degree of annexation and permanence. The fact that the structure was pre-fabricated, bolted, and capable of dismantling did not change its character where the warehouse was erected for stable and enduring business use. The structure was therefore treated as immovable property.

Conclusion: The pre-engineered warehouse structures were held to be immovable property.

Issue (ii): Whether input tax credit is available on such structures or is blocked under the provision relating to construction of immovable property.

Analysis: Input tax credit is allowed only where the statutory conditions for business use are satisfied, but the restriction applies to goods or services received for construction of immovable property on own account. Since the warehouse structures were held to be immovable property and the procurement was for their construction/erection, the restriction on credit was attracted. The argument that the items were recorded as plant and machinery did not override the statutory bar.

Conclusion: Input tax credit was not available and was blocked under the statutory restriction.

Final Conclusion: The ruling determined that the warehouse structures constituted immovable property and that the related credit claim failed within the blocked-credit regime, leaving the applicant without entitlement to input tax credit on the pre-engineered structures.

Ratio Decidendi: A pre-engineered structure erected with sufficient annexation and intended for enduring warehouse use is immovable property, and credit is barred when the procurement is for construction of such immovable property on own account.

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