2019 (10) TMI 1018 - AAR - GST

Input Tax Credit Eligibility: GST on Wooden Flooring Allowed, Glass Partitions Disallowed

The Authority ruled that the input tax credit of GST can be availed on the detachable 14mm Engineered Wood with Oak Top Wooden Flooring as it is movable ... Input tax credit under Section 16(1) - Restriction on ITC for construction of immovable property under Section 17(5)(d) - Definition of immovable property and applicability of General Clauses Act - Movable versus immovable property (detachable fit-outs) - Capitalisation and additions to immovable propertyInput tax credit under Section 16(1) - Restriction on ITC for construction of immovable property under Section 17(5)(d) - Movable versus immovable property (detachable fit-outs) - Input tax credit admissibility in respect of detachable 14 mm engineered wood with oak top wooden flooring - HELD THAT: - The Authority accepted that Section 16(1) ordinarily entitles a registered person to take ITC on goods used in the course or furtherance of business, subject to restrictions in Section 17(5). The restriction in Section 17(5)(d) applies to goods or services received 'for construction of an immovable property' and includes additions to the immovable property to the extent of capitalization. The Authority examined whether the detachable wooden flooring amounted to an addition to immovable property. Noting the applicant's factual case that the flooring is an inter-locking system laid over pedestals using foam, removable without damage, not sine qua non for creating the office space and capable of being detached and reused, the Authority held that such flooring lacks the requisite permanence or attachment to qualify as an addition to immovable property. The Authority further observed that mere classification in books as a fixed asset head does not alter the intrinsic nature, but here the physical characteristics (detachable, no damage on removal, not essential to the office demarcation) establish movability. Applying these findings, the restriction in Section 17(5)(d) does not operate and ITC is admissible on the detachable wooden flooring. [Paras 9]Input tax credit can be availed on the detachable 14 mm engineered wood with oak top wooden flooring.Input tax credit under Section 16(1) - Restriction on ITC for construction of immovable property under Section 17(5)(d) - Definition of immovable property and applicability of General Clauses Act - Capitalisation and additions to immovable property - Input tax credit admissibility in respect of detachable sliding and stacking glass partitions - HELD THAT: - The Authority analysed whether the glass partitions constitute an addition to immovable property within the meaning of Section 17(5)(d). Relying on the inclusive definition of 'immovable property' in the General Clauses Act (things attached to the earth or permanently fastened to anything attached to the earth), the Authority noted that the partitions are fixed to the building to create and demarcate rentable office spaces and are thus integral to the permanence and functionality of the office space. The Authority concluded that these partitions are permanently fastened for the purpose of demarcating and enabling the letting out of the office space and therefore amount to additions/alterations to immovable property. As such, the restriction in Section 17(5)(d) overrides Section 16 and ITC is not admissible on these partitions. [Paras 9]Input tax credit is not available on the detachable sliding and stacking glass partitions.Final Conclusion: The Authority allowed ITC on the detachable engineered wood flooring as it does not constitute an addition to immovable property, but denied ITC on the sliding/stacking glass partitions which were held to be additions/alterations to immovable property and therefore excluded by Section 17(5)(d). Issues Involved:1. Eligibility of Input GST Credit on Detachable 14mm Engineered Wood with Oak Top Wooden Flooring.2. Eligibility of Input GST Credit on Detachable Sliding and Stacking Glass Partitions.Detailed Analysis:1. Eligibility of Input GST Credit on Detachable 14mm Engineered Wood with Oak Top Wooden Flooring:The applicant, involved in providing shared workspaces, sought an advance ruling to determine if they could avail Input GST Credit on detachable 14mm Engineered Wood with Oak Top Wooden Flooring, which is movable and capitalized as 'furniture and fixture.'- Section 16 of the CGST Act: The applicant argued that under Section 16, they are entitled to take credit of input tax charged on supplies used in the course or furtherance of business. Since the flooring is used in rented office spaces, the condition for availment of ITC is satisfied.- Section 17(5)(d) of the CGST Act: The applicant contended that the restriction under Section 17(5)(d) does not apply as the flooring is not used for the construction of immovable property. The flooring is movable, not inextricably linked to the building, and capitalized as 'furniture and fixture,' not as immovable property.- Nature of Flooring: The detachable flooring is installed using a foam and can be easily removed and reused without damaging the building or the flooring itself, indicating it is not a permanent addition to the immovable property.- Judicial Precedents: The applicant cited various rulings and judgments supporting the view that movable items used in the course of business qualify for ITC. For instance, the Uttarakhand AAR in M/s. VINDHYA TELELINKS LTD held that movable infrastructure qualifies for ITC.Ruling: The Authority ruled that the input tax credit of GST can be availed on the detachable 14mm Engineered Wood with Oak Top Wooden Flooring as it is movable and capitalized as 'furniture.'2. Eligibility of Input GST Credit on Detachable Sliding and Stacking Glass Partitions:The applicant also sought an advance ruling on whether they could avail Input GST Credit on detachable sliding and stacking glass partitions, which are movable and capitalized as 'furniture and fixture.'- Section 16 of the CGST Act: Similar to the flooring, the applicant argued that the glass partitions are used in the course or furtherance of business, thus qualifying for ITC under Section 16.- Section 17(5)(d) of the CGST Act: The applicant claimed that the restriction under Section 17(5)(d) does not apply as the partitions are capitalized as 'furniture and fixture' and not as immovable property. They provided a chartered accountant certificate to support this classification.- Nature of Partitions: The partitions are fixed using nuts and bolts and can be dismantled and reused, indicating they are not permanently attached to the building.Findings & Discussion:- Immovable Property Definition: The Authority noted that the partitions, though detachable, are fixed to the building to create office spaces, providing a certain degree of permanence. They are essential for demarcating office spaces and are permanently fastened to the building, thus qualifying as additions to immovable property.- Application of Section 17(5)(d): Since the partitions are used for constructing an immovable property, the input tax credit on them is restricted under Section 17(5)(d).Ruling: The Authority ruled that the input tax credit of GST is not available on the detachable sliding and stacking glass partitions as they are considered additions to immovable property.Conclusion:- Detachable 14mm Engineered Wood with Oak Top Wooden Flooring: Eligible for Input GST Credit as it is movable and capitalized as 'furniture.'- Detachable Sliding and Stacking Glass Partitions: Not eligible for Input GST Credit as they are considered additions to immovable property.