2021 (12) TMI 473 - AAR - GST

Applicant eligible for Input Tax Credit on machine foundation as 'plant & machinery.' Limits clarified for construction services.

In Re: M/s. Vijayneha Polymers Private limited,

The ruling authority concluded that the applicant was eligible for Input Tax Credit (ITC) only on the machine foundation as it falls under the definition ... Availability of ITC - GST charged by the contractor supplying service of works contract - Section 17(5) of the CGST/SGST Act - HELD THAT:- Following conclusions are arrived with respect to the facts of the present case: 1. ITC cannot be availed on works contract services for construction of an immovable property except for erection of plant & machinery. 2. ITC can be availed on plant & machinery as defined in the explanation to Section 17 i.e., on apparatus, equipment & machinery fixed to earth by foundation or structural support; which means plant & machinery and machine foundation are eligible for ITC. 3. Plant & machinery will not include building or other civil structures and pipelines laid outside factory premises. 4. ITC cannot be availed on goods or services or both received by a tax payer on his own account for construction of immovable property. The applicant is eligible for ITC to the extent of machine foundation only. Issues:Availability of Input Tax Credit (ITC) on GST charged by the contractor supplying service of works contract.Analysis:The case involved an application filed by a company seeking clarification on the eligibility of Input Tax Credit (ITC) on amounts charged by contractors for construction services. The applicant had hired contractors for construction in two different ways: where the applicant provided material and the contractor provided services, and where the contractor provided both material and services. The construction included various aspects like machinery foundation, rooms for chillers, boilers, generators, transformers, electrical poles, internal roads, factory building, drainage, and laboratory. The applicant sought an advance ruling on the availability of ITC on GST charged by the contractor for these services.During the personal hearing, the authorized representatives of the company reiterated the application's contentions. The Authority for Advance Ruling analyzed the case in light of Section 17(5) of the CGST/SGST Acts, which states that ITC shall not be available for works contract services for the construction of an immovable property, except when it is an input service for further supply of works contract service. The explanation to Section 17 clarified that 'construction' includes various activities related to immovable property.The ruling authority concluded that ITC can be availed only on the machine foundation as it falls under the definition of 'plant & machinery' provided in the explanation to Section 17. It was highlighted that plant & machinery do not include buildings, civil structures, or pipelines outside factory premises. Therefore, the applicant was deemed eligible for ITC only to the extent of the machine foundation. The ruling clarified that the applicant could avail ITC on the machine foundation but not on other aspects of the construction services provided by the contractor.In summary, the advance ruling clarified that the applicant was eligible for Input Tax Credit (ITC) only on the machine foundation, as per the provisions of Section 17 of the CGST/SGST Acts. The ruling highlighted the specific conditions under which ITC could be claimed for works contract services related to the construction of an immovable property, emphasizing the limitations and eligibility criteria based on the nature of the services provided.