ITC denied for breakwater construction as immovable property, not plant/machinery under GST Act. Works contract services classification not addressed.

The applicant was deemed ineligible to avail/utilize Input Tax Credit (ITC) for the construction of a breakwater wall, as it was considered immovable property and not classified as plant and machinery under the GST Act. The authority did not address the classification of works contract services related to earthwork for the breakwater construction, stating that this issue fell outside the scope of the applicant's query under advance ruling provisions.

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Issues Involved:

1. Eligibility to avail/utilize input tax credit (ITC) for taxes paid on the construction of the breakwater wall.
2. Classification of works contract services in relation to earthwork under Notification No. 11/2017-Central Tax (Rate).

Detailed Analysis:

Issue 1: Eligibility to Avail/Utilize Input Tax Credit

The applicant, engaged in regasification of LNG, sought clarification on whether they could avail ITC for taxes paid on the construction of a breakwater wall adjacent to their jetty. The breakwater wall, according to the applicant, is integral to the jetty's operation, ensuring safety and operational efficiency by protecting against high waves and tides.

The applicant argued that the breakwater wall should be considered as "plant and machinery" and not fall under the exclusion clause of Section 17(5) of the GST Act, which disallows ITC for construction of immovable property (other than plant or machinery). They supported their claim by citing various judicial precedents where structures integral to business operations were considered as plant and machinery.

However, the authority observed that the breakwater wall is an immovable property and does not qualify as "plant and machinery" under the GST Act's definition. The breakwater wall is a civil structure, and as per Section 17(5)(d), ITC is not available for immovable property construction. The authority emphasized that the breakwater wall, while facilitating the receipt of raw material (LNG), is not used for making outward supply of goods or services, thus disqualifying it from being considered as plant and machinery.

The authority concluded that the applicant is not eligible to avail/utilize ITC for the construction of the breakwater wall.

Issue 2: Classification of Works Contract Services

The applicant also sought a ruling on whether the works contract services intended for the breakwater construction, which they claimed predominantly involved earthwork, fall under item (vii) of serial No. 3 of Notification No. 11/2017-Central Tax (Rate).

The authority noted that it is governed by the provisions of Chapter XVII of the CGST Act, which allows for advance rulings on matters related to the supply of goods or services by the applicant. Since the breakwater construction is to be carried out by a contractor, the supply in question is undertaken by the contractor, not the applicant. Therefore, the authority determined that this issue does not fall within its purview and did not provide an answer.

Conclusion:

1. Eligibility to Avail/Utilize ITC: The applicant is not eligible to avail/utilize ITC for the construction of the breakwater wall as it is considered an immovable property and not plant and machinery under the GST Act.

2. Classification of Works Contract Services: The authority did not answer this question, as it pertains to the contractor's supply, which is outside the scope of the applicant's query under the advance ruling provisions.

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