Input Tax Credit denied for project development services in Smart Industrial Port City construction

The Authority for Advance Ruling held that Input Tax Credit is not available under the Central Goods and Services Tax Act, 2017 for project development services related to the construction of an immovable property for the development of a Smart Industrial Port City (SIPC). This decision is in accordance with Section 17(5) of the CGST Act, which excludes works contract services or goods and services used for immovable property construction from claiming Input Tax Credit.

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Issues:

- Availability of Input Tax Credit under the Central Goods and Services Tax Act, 2017 for project development services related to the construction of an immovable property for the development of a Smart Industrial Port City (SIPC).

Analysis:

The applicant, a port trust, is developing a Smart Industrial Port City (SIPC) within Gandhidham-Kandla-Adipur Complex under the ministry of shipping's directions. The project involves developing mixed-use residential areas, institutional facilities, commercial spaces, recreational areas, and an industrial park with logistic facilities. The applicant plans to auction the land under SIPC for a long-term premium, subject to GST under Real Estate Service (HSN 9972). The issue revolves around the availability of Input Tax Credit for various project development services incurred by the Deendayal Port Trust.

The Central Goods and Services Tax Act, 2017, allows registered persons to claim Input Tax Credit on goods or services used in the course or furtherance of their business. However, Section 17(5) of the CGST Act specifies goods and services for which Input Tax Credit is not available. Notably, this section denies credit for works contract services or goods and services used for the construction of an immovable property. Since the development of SIPC involves constructing immovable properties, the project development services like Programme management consultancy, Marketing Consultancy, Land levelling, Roads, Infrastructure, and related works are ineligible for Input Tax Credit under the CGST Act.

In conclusion, the Authority for Advance Ruling ruled that Input Tax Credit shall not be available under the CGST Act, 2017, for project development services related to the construction of an immovable property for the development of SIPC. This decision aligns with the provisions of Section 17(5) of the CGST Act, which specifically excludes works contract services or goods and services used for immovable property construction from claiming Input Tax Credit.

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