2020 (12) TMI 794 - AAR - GST

Rectification of Typographical Error in Advance Ruling Clarifies Input Tax Credit Eligibility

The corrigendum order rectified a typographical error in an Advance Ruling related to the treatment of laying paver blocks as works contract service for ... Input tax credit - works contract service - construction of immovable property - capitalization versus revenue expenditure - restriction under section 17(5)(c) of the CGST ActWorks contract service - construction of immovable property - capitalization versus revenue expenditure - input tax credit - restriction under section 17(5)(c) of the CGST Act - Whether laying of paver blocks by the applicant amounts to works contract service for construction of immovable property so as to attract the restriction on input tax credit under section 17(5)(c) of the CGST Act. - HELD THAT: - The Authority found that the expression 'construction' for the purposes of the restriction includes reconstruction, renovation, addition, alteration or repairs only to the extent such expenditure is capitalized to the immovable property. The corrigendum corrects the factual characterisation in para 2.7: the expenditure on paver blocks has been booked as revenue expenditure in the applicant's books, and on that basis does not amount to construction of an immovable property. Because the expenditure is not capitalized and therefore does not fall within the scope of construction of immovable property, the restriction in section 17(5)(c) does not apply to disallow the input tax credit claimed in respect of laying the paver blocks.Laying of the paver blocks does not amount to works contract service for construction of immovable property where the expenditure is booked as revenue expenditure; accordingly the input tax credit claimed is not barred by the restriction in section 17(5)(c) of the CGST Act.Typographical error correction - corrigendum - Correction of a typographical error in para 2.7 of the Advance Ruling order dated 18.03.2020. - HELD THAT: - The applicant pointed out that para 2.7 of the impugned order contained an incorrect factual statement regarding whether the expenditure on paver blocks had been booked as revenue or capital expenditure. The Authority, on review, issued a corrigendum to replace para 2.7 with the corrected wording stating that the expenditure has been booked as revenue expenditure, thereby altering the factual premise relevant to the applicability of section 17(5)(c). The corrigendum rectifies the typographical error in the observation portion of the earlier order.Typographical error in para 2.7 is corrected by corrigendum to reflect that the paver block expenditure has been booked as revenue expenditure; the corrected paragraph stands substituted in the earlier Advance Ruling.Final Conclusion: The Authority issued a corrigendum to amend para 2.7 of the Advance Ruling dated 18.03.2020; on the corrected factual basis that the paver block expenditure is revenue expenditure, laying of paver blocks is not construction of immovable property and the input tax credit claimed is not hit by the restriction in section 17(5)(c) of the CGST Act. Issues:1. Correction of typographical error in the Advance Ruling order regarding the treatment of laying paver blocks as works contract service for construction of immovable property under section 17(5)(c) of the CGST Act.Analysis:In the case of M/s. Sundharams Private Limited, an Advance Ruling was passed under Sections 98 of the Central Goods and Services Tax Act and the Maharashtra Goods and Services Tax Act, 2017. The applicant pointed out an error in para 2.7 of the ruling where it was erroneously stated that laying paver blocks did not amount to works contract service for construction of immovable property under section 17(5)(c) of the CGST Act. The correction issued clarified that the expression 'construction' under section 17(5)(c) includes reconstruction, renovation, addition, alteration, or repairs to the extent of capitalization to the immovable property. It was noted that the expenditure on the paver blocks had been booked as revenue expenditure in the applicant's accounts, therefore not constituting construction of immovable property. Consequently, the input tax credit claimed by the applicant was not affected by the restriction under section 17(5)(c) of the CGST Act.This corrigendum order rectified the typographical error in para 2.7 of the Advance Ruling order, ensuring that the correct interpretation of the law regarding the treatment of laying paver blocks as works contract service for construction of immovable property under section 17(5)(c) of the CGST Act was reflected. The correction clarified that the nature of the expenditure on the paver blocks, being booked as revenue expenditure in the applicant's accounts, did not fall within the ambit of 'construction' as defined under section 17(5)(c). Therefore, the input tax credit claimed by the applicant was deemed valid and not subject to the restrictions imposed by the aforementioned provision.Overall, the correction issued in the corrigendum order addressed the discrepancy in the interpretation of the law regarding the treatment of laying paver blocks in the context of works contract service for construction of immovable property under section 17(5)(c) of the CGST Act. By rectifying the error and providing a clear explanation of the correct application of the law, the Advance Ruling Authority ensured that the applicant's input tax credit claim was appropriately assessed and validated in accordance with the relevant legal provisions.