LNG jetties ruled as civil structures, not plant and machinery, input tax credit denied under Section 17

The AAAR Gujarat held that LNG jetties do not qualify as plant and machinery under Section 17 of CGST Act, 2017. The authority ruled that jetties are civil structures excluded from the definition of foundation and structural supports. For input tax credit eligibility, foundations must exclusively fix plant and machinery to earth for outward supply of goods or services. Since the applicant failed to establish that jetties serve as foundations for equipment used in outward supply, input tax credit on construction inputs, services, and capital goods was denied.

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Issues Involved:
1. Whether LNG jetties qualify as "plant and machinery" under Section 17 of the CGST Act, 2017.
2. Eligibility for input tax credit (ITC) on GST paid for inputs, input services, and capital goods used in constructing LNG jetties.

Issue-wise Analysis:

1. Whether LNG jetties qualify as "plant and machinery" under Section 17 of the CGST Act, 2017:

The appellant, M/s. Swan LNG Pvt. Ltd., entered into a Concession Agreement for the development of an LNG Port with a Floating Storage and Regasification Unit (FSRU) facility. They sought clarity on whether LNG jetties could be considered as "plant and machinery" under Section 17 of the CGST Act, 2017, which would allow them to claim ITC.

The Gujarat Authority for Advance Ruling (GAAR) concluded that LNG jetties are civil structures and do not qualify as "plant and machinery." GAAR's findings included:
- LNG jetties are immovable properties constructed on pillars or plinths extending from the seashore to the deep sea.
- Foundations are structures located below the ground supporting buildings above, whereas jetties are high above the seashore and extend into the deep sea.
- The definition of "plant and machinery" excludes land, buildings, and any other civil structures. Therefore, LNG jetties do not meet the criteria for "plant and machinery."

The appellant argued that the jetties serve as foundations for plant and machinery necessary for regasification. However, GAAR held that the apparatus, equipment, and machinery are not fixed to the earth by foundation or structural support and are instead fixed to the jetties, which are civil structures.

2. Eligibility for ITC on GST paid for inputs, input services, and capital goods used in constructing LNG jetties:

The appellant claimed that ITC should be available for GST paid on inputs, input services, and capital goods used in constructing LNG jetties, as these jetties are foundational for plant and machinery.

GAAR's ruling stated:
- Section 17(5)(c) and (d) of the CGST Act, 2017, restricts ITC on works contract services and goods or services received for constructing immovable property, other than plant and machinery.
- The definition of "plant and machinery" includes apparatus, equipment, and machinery fixed to the earth by foundation or structural support, but excludes civil structures.
- The jetties are civil structures and, therefore, do not qualify for ITC under the CGST Act, 2017.

The appellant's appeal reiterated that LNG jetties should be considered as foundations for plant and machinery, citing various contracts and certifications. However, the appellate authority upheld GAAR's ruling, stating that:
- The jetties are civil structures excluded from the definition of "plant and machinery."
- The foundation of plant and machinery must be exclusively for fixing plant and machinery to the earth and used for making outward supply of goods or services.
- The appellant did not provide sufficient evidence to substantiate their claim that LNG jetties are foundational for plant and machinery used for outward supply.

Conclusion:

The appeal was rejected, and the Advance Ruling No. GUJ/GAAR/R/46/2020 was confirmed. The LNG jetties being built by the appellant are not considered "plant and machinery" under Section 17 of the CGST Act, 2017. Consequently, the appellant cannot avail ITC on GST paid for inputs, input services, and capital goods used in constructing the LNG jetties.

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