Denial of GST Credit for Industrial Inputs: Building Infrastructure vs. Plant & Machinery

The applicant, engaged in industrial warehousing, sought input GST credit on specific inputs. The applicant argued that the items qualify as plant and machinery, not restricted by Section 17(5) of the CGST Act. However, the authority found that the items are part of the building infrastructure, falling under the restriction of Section 17(5). As a result, the applicant was denied input GST credit on Electrical Works, Pumps, Pumping Systems and Tanks, Lighting System, Physical Security System, and Fire System under the CGST Act and the Karnataka Goods and Services Tax Act.

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Issues Involved:
1. Eligibility of Input GST Credit on Electrical Works, Pumps, Pumping Systems and Tanks, Lighting System, Physical Security System, and Fire System.

Detailed Analysis:

1. Eligibility of Input GST Credit on Electrical Works, Pumps, Pumping Systems and Tanks, Lighting System, Physical Security System, and Fire System:

Applicant's Submissions:
- The applicant, engaged in building and managing industrial warehousing spaces, sought advance ruling on whether input GST credit can be availed on specific inputs used in their business operations.
- The applicant argued that under Section 16(1) of the CGST Act, 2017, they are entitled to take credit of input tax charged on any supply of goods or services used in the course or furtherance of business.
- The applicant claimed that Section 17(5) of the CGST Act restricts input tax credit on goods and services received for the construction of immovable property but excludes plant and machinery. They argued that the items in question qualify as plant and machinery and are movable, thus not restricted by Section 17(5).

Authority's Findings:
- The applicant is engaged in providing rental commercial space and procures various goods and services for fitting out the warehouse spaces.
- Section 16(1) of the CGST Act entitles them to take input tax credit on supplies used in the course or furtherance of business.
- However, Section 17(5) overrides Section 16(1) and disallows input tax credit on:
- Works contract services for construction of immovable property (other than plant and machinery).
- Goods or services received for construction of immovable property (other than plant or machinery) on the applicant's own account.
- The term "construction" includes re-construction, renovation, additions, or alterations to the extent of capitalization.
- The applicant's argument that the items are not capitalized as immovable property in their books of accounts was rejected. The nature of the asset as immovable property does not change based on its classification in the books of accounts.
- The items procured are considered works contract services resulting in immovable property, thus falling under the restriction of Section 17(5).
- The items do not have independent existence and are part of the building infrastructure, thus excluded from the definition of "plant and machinery" under Section 17(5).

Ruling:
- Input GST credit cannot be availed by the applicant on the inputs i.e., Electrical Works, Pumps, Pumping Systems and Tanks, Lighting System, Physical Security System, and Fire System as it is blocked under Section 17(5) of the CGST Act, 2017, and the Karnataka Goods and Services Tax Act, 2017.

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