2021 (8) TMI 736 - AAR - GST

Court ruling on admissibility of Input Tax Credit for various items under CGST Act

The court ruled that Input Tax Credit (ITC) was admissible for the new locker cabinet and generator. However, ITC was blocked under Section 17(5)(c) of ... Input tax credit - Central Air Conditioning Plant, Classified & Grouped under Plant & Machinery - New Locker Cabinet, lift, Roof Solar - Generator, Fire safety extinguishers - Classified & Grouped under “Locker Cabinets - Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables Materials, Classified & Grouped under Separate Block namely 'Electrical Fittings' - Architect Service Fees and Interior Designing Fees, Charged to Profit & Loss Account - ITC blocked vide Section 17(5) CGST Act or not. Central Air Conditioning Plant - HELD THAT:- The applicant entered into a contract for Supply, installation, erection and commissioning of Central Air Conditioning plant in the Administrative building. We note that this Plant is basically a system comprising of compressors, ducting, pipings, insulators etc. They are in the nature of systems and are not machines as a whole. They come into existence only by assembly and connection of various components and parts. Though each component is dutiable to GST, the air conditioning plant as such is not a good under HSN (customs Tariff Heading) - the Central Air Conditioning plant fitted in the building cannot be taken as such to the market for sale and cannot be shifted from one place to another as such to erect at another site. It can be shifted only after dismantling the plant which cannot be called ‘Centralised Air conditioning plant’ after it is dismantled as such the most of the ancillary item like copper pipes, flexible water pipe etc may become obsolete and cannot be shifted at other site. The Central Air Conditioning Plant once installed and commissioned in the building is transferred to the building owner and this involves transfer of property. We thus find no merit to treat an entire Central Air conditioning system a movable property - the supply and erection of subject immovable property- Central Air conditioning system merit its classification under works contract service. Lift - HELD THAT:- The lift has passed the test of permanency as laid down by the Hon’ble Supreme Court, in THE MUNICIPAL CORPORATION OF GREATER BOMBAY VERSUS THE INDIAN OIL CORPORATION [1990 (11) TMI 407 - SUPREME COURT] and find lift an immovable property. It is noted the applicant’s submission that if somebody wants to purchase the lift, the whole Lift is to be dismantled and sold to him in parts. Thus, the subject supply merits classification under works contract service and is covered at Section 17(5) (c) CGST Act. We find no merit to deem lift as plant and machinery. Lift is in fact a part of the administrative building after being erected and installed - thus, lift is an immovable property after being erected and is attached to the building itself. Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables Materials - HELD THAT:- The installation of electrical fittings are covered vide the definition of works contract, where these fittings are fitted/installed and usually concealed/ piped into the wall of the administrative building and transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. These electrical fitting cannot be shifted intact from one place to another without dismantling/ cutting the wire and switch board/ removing the swtiches, therefore, as per the test of permanency - We cannot envisage a building without light and and therefore by reason of this supply being essential and integral to the administrative block, we may confer this immovable property a subset within the immovable administrative building, treating the building a whole set. Roof Solar Plant - HELD THAT:- The Applicant entered into a comprehensive SITC Contract (Supply, Installation, Testing & Commissioning) with the vendor for installation of Roof Solar Plant. The said Plant will be attached on the concrete base with the nuts and bolts. It is a system specifically to fit the dimensions and orientation of the needs of the applicant - for the purpose of valuation and tax rate, the said explanation to said sr no 234 has been inserted w.e.f 1-1-19. But plain reading of the said Schedule II sr no 6 (a) and the nature of supply at hand, we find this is a composite supply under works contract. The applicant submitted that if resold, the entire system needs to be dismantled and had to be reassembled at another site. Further the said system/ plant has different goods which when assembled and installed become a roof solar plant. The specific valuation and tax determination does not change the scope of supply under Works contract - thus, Roof Solar plant is a composite supply of works contract and covered at Section 17(5)(c) CGST Act. Fire Safety Extinguisher - HELD THAT:- The Fire Safety Extinguisher structure contains various types of metal pipes, different types of motors and equipments etc. and all these parts/equipments are assembled at site for the complete set of ‘Fire Safety Extinguisher’ to came into existence. After assembly and installation at/in the Administrative building, the Fire Safety Extinguisher is commissioned and handed over to the owner of the building by the contractor. The said Fire Safety Extinguisher cannot be shifted as a whole as such to another place. For this it should be first dismantled piece by piece - the system assembled, erected and attached to the earth by a foundation is immovable property and supply is covered within the definition of works contract supply. Generator - HELD THAT:- The generator a movable item and its expense capitalised by the applicant and hold it supply of capital goods. Locker Cabinet - HELD THAT:- The locker cabinet are movable goods. Architect Service Fees and Interior Designer Fees - HELD THAT:- There are no merit to extend the explanation to subject administrative building, as the said administrative building is a new construction and not falling under reconstruction/ renovation/additions/alterations/repairs. Further the explanation defines an inclusive definition of Construction, defining construction to include, inter alia, re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. This definition is not exhaustive and does not bar within the definition of Construction, new construction. Whether the supply of architect service or interior decorator service supplied for the new administrative building is revenue or capital expenditure, it does not matter as long as the construction is new and thereby subject supplies are covered at Section 17 (5) (d) CGST Act. Issues Involved:1. Eligibility of Input Tax Credit (ITC) for various expenses incurred during the construction of a new administrative building.Issue-wise Detailed Analysis:1. Central Air Conditioning Plant:The applicant entered into a contract for the supply, installation, erection, and commissioning of a Central Air Conditioning plant. The plant comprises various components and is not considered a machine as a whole. The plant is classified as an immovable property because it cannot be transported intact and must be dismantled for relocation. The plant is thus categorized as a 'works contract service' and is covered under Section 17(5)(c) of the CGST Act, blocking ITC.2. Lift:The lift, comprising several parts, is assembled and installed to suit the building's requirements. Post-installation, it becomes part of the immovable property. The lift is considered immovable as it must be dismantled for relocation. The supply is classified under works contract service, covered under Section 17(5)(c) CGST Act, blocking ITC.3. Electrical Fittings:Electrical fittings, such as cables and switches, are integrated into the building's electrical system and are considered immovable property. These fittings are essential and integral to the building, thus classified under works contract service, covered under Section 17(5)(c) CGST Act, blocking ITC.4. Roof Solar Plant:The Roof Solar Plant is installed on a concrete base and is considered immovable property as it must be dismantled for relocation. The supply is classified as a composite supply of works contract, covered under Section 17(5)(c) CGST Act, blocking ITC.5. Fire Safety Extinguishers:The Fire Safety Extinguishers are installed with metal framing embedded in concrete, making them immovable property. The supply is classified under works contract service, covered under Section 17(5)(c) CGST Act, blocking ITC.6. Generator:The generator is considered movable and classified as capital goods. ITC is admissible for the generator.7. New Locker Cabinet:The locker cabinet is considered movable goods. ITC is admissible for the locker cabinet.8. Architect Service Fees:Architect services for the new administrative building are considered part of the construction process. These services are classified under Section 17(5)(d) CGST Act, blocking ITC.9. Interior Designing Fees:Interior designing services for the new administrative building are also part of the construction process. These services are classified under Section 17(5)(d) CGST Act, blocking ITC.Ruling:1. Admissible ITC: New Locker Cabinet and Generator.2. Blocked ITC under Section 17(5)(c) CGST Act: Central Air Conditioning Plant, Lift, Electrical Fittings, Fire Safety Extinguishers, Roof Solar Plant.3. Blocked ITC under Section 17(5)(d) CGST Act: Architect Service Fees and Interior Designing Fees.