Tax Credits Denied for Mall Construction: What Qualifies as Plant & Machinery?

The appellate authority upheld the decision that taxes paid on procurement of certain installations in a shopping mall under construction are blocked credits under Section 17(5) of the CGST Act, 2017. The authority held that items like Lift, Escalator, WTP, STP, HSD Yard, MLCP, DG Sets, and Transformers qualify as "Plant and Machinery" and are eligible for input tax credit, while Chiller, AHU, CCTV, Electrical wiring and fixtures, and PHE systems do not qualify as "Plant and Machinery" and are not eligible for input tax credit. The appellant's appeal was dismissed.

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Issues Involved:
1. Eligibility for input tax credit on goods and services used for the installation of various items in a shopping mall under construction.
2. Interpretation of "Plant and Machinery" under Section 17(5) of the CGST Act, 2017.
3. Applicability of judicial pronouncements and precedents in determining the eligibility for input tax credit.
4. Impact of the Orissa High Court judgment in the case of Safari Retreats Pvt Ltd.

Detailed Analysis:

1. Eligibility for Input Tax Credit:
The appellant sought advance ruling on whether taxes paid on procurement of goods and/or services for installations such as Chillers, AHU, Lift, Escalators, WTP, STP, HSD Yard, MLCP, CCTV, DG Sets, Transformers, Electrical wiring and fixtures, and PHE systems are blocked credits under Section 17(5) of the CGST Act, 2017. The Authority for Advance Ruling held that these are regarded as blocked credits under Section 17(5).

2. Interpretation of "Plant and Machinery":
The appellant argued that the definition of "Plant and Machinery" in the CGST Act should not apply to the phrase "Plant or Machinery" in Section 17(5). They contended that the installations qualify as "Plant" or "Machinery" and thus should not be blocked credits. However, the appellate authority held that the general understanding of "Plant and Machinery" includes apparatus, equipment, and machinery fixed to earth by foundation or structural support, excluding civil structures, telecommunication towers, and pipelines outside factory premises.

3. Applicability of Judicial Pronouncements:
The appellant relied on various judicial pronouncements to support their claim that the installations qualify as "Plant" or "Machinery." However, the appellate authority found these arguments irrelevant, stating that the restriction in Section 17(5)(d) applies to goods and services received for the construction of immovable property, except for "Plant and Machinery."

4. Impact of Orissa High Court Judgment:
The appellant cited the Orissa High Court judgment in Safari Retreats Pvt Ltd, which allowed input tax credit on goods/services used for construction rented for commercial purposes. However, the appellate authority noted that this judgment is under appeal in the Supreme Court and has not attained finality, thus not having persuasive value.

Findings and Conclusion:
The appellate authority examined the nature of the installations. Items like Lift, Escalator, Travellator, WTP, STP, HSD Yard, MLCP, DG Sets, and Transformers were considered "Plant and Machinery" as they are fixed to earth by foundation or structural support. However, items like Chiller, AHU, CCTV, Electrical wiring and fixtures, and PHE systems were not considered "Plant and Machinery" due to the lack of evidence showing they are fixed to earth. Consequently, the appellant was not eligible for input tax credit on these items.

Order:
The appellate authority upheld the Order No. KAR ADRG 103/2019, dismissing the appeal filed by the appellant on all counts.

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