Appeal dismissed for blocked input tax credit on office construction items under Section 17(5)(c) and 17(5)(d)

AAAR Gujarat dismissed the appeal regarding blocked input tax credit for construction of new administrative office. The authority held that central air conditioning plant, lift, electrical fittings, and fire safety extinguishers become immovable property upon installation through works contract services, thus blocking ITC under Section 17(5)(c) of CGST Act. Architect and interior designer fees were blocked under Section 17(5)(d) as construction-related services. However, roof solar plant qualified as plant and machinery, not immovable property, making ITC eligible as it wasn't permanently fastened to the building.

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Issues Involved:
1. Eligibility for Input Tax Credit (ITC) on various goods and services used in the construction of a new administrative building.
2. Interpretation of Section 17(5) of the CGST Act, 2017 regarding blocked credits.

Summary:

Central Air Conditioning Plant:
The appellant argued that the Central Air Conditioning Plant should not be considered immovable property as it does not involve assimilation with the property. However, the court found that the plant becomes part of the building once installed, making it immovable property. Thus, ITC on the Central Air Conditioning Plant is blocked under Section 17(5)(c) of the CGST Act, 2017.

Lift:
The appellant claimed ITC on the lift, classifying it under "Plant & Machinery." The court, referencing the case of M/s. Otis Elevator Company (India), held that the lift becomes an integral part of the immovable property once installed. Therefore, ITC on the lift is blocked under Section 17(5)(c) of the CGST Act, 2017.

Electrical Fittings:
The appellant sought ITC on electrical fittings not used in civil construction. The court found that electrical fittings, once installed, become part of the building and thus immovable property. Therefore, ITC on electrical fittings is blocked under Section 17(5)(c) of the CGST Act, 2017.

Roof Solar Plant:
The appellant argued that the roof solar plant should be considered "Plant and Machinery" as it is not permanently fastened to the building. The court agreed, stating that the roof solar plant qualifies as plant and machinery and is not immovable property. Therefore, ITC on the roof solar plant is admissible.

Fire Safety Extinguishers:
The appellant claimed ITC on fire safety extinguishers, arguing they are mandatory under the Gujarat Fire Prevention and Life Safety Measures Act, 2013. The court found that fire safety extinguishers become part of the building and are thus immovable property. Therefore, ITC on fire safety extinguishers is blocked under Section 17(5)(c) of the CGST Act, 2017.

Architect Service Fees and Interior Designing Fees:
The appellant argued that these fees should be eligible for ITC as they are charged to the Profit & Loss Account. The court found that such professional fees should be capitalized as per Accounting Standards. Therefore, ITC on architect service fees and interior designing fees is blocked under Section 17(5)(d) of the CGST Act, 2017.

Conclusion:
The appeal was rejected, and the Advance Ruling No. GUJ/GAAR/R/37/2021 dated 30.07.2021 was upheld, except for the roof solar plant, where ITC was deemed admissible.

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