2024 (3) TMI 673 - AAR - GST

Godowns built for commercial rental to registered dealers don't qualify for input tax credit under section 17(5)(d)

AAR held that no input tax credit is available on goods/services used for constructing godowns intended for commercial rental to registered dealers. The ... No input tax credit for goods or services received for construction of an immovable property on one's own account - input tax credit - construction of an immovable property (other than plant and machinery) - use in the course or furtherance of business - binding nature of advance rulingNo input tax credit for goods or services received for construction of an immovable property on one's own account - input tax credit - construction of an immovable property (other than plant and machinery) - use in the course or furtherance of business - Availability of input tax credit on goods and input services used for construction of godowns that the applicant proposes to rent out for commercial purposes to registered dealers. - HELD THAT: - The Authority examined the application under Section 97(2) and considered whether Section 17(5)(d) applies to the facts. Section 17(5)(d) provides that input tax credit shall not be available in respect of goods or services received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account, including when such goods or services are used in the course or furtherance of business. The applicant built godowns for letting out to commercial tenants and received supplies such as cement, steel, PEB sheets and services of architects/consultants for that construction. The Authority found that these supplies fall squarely within the prohibition in Section 17(5)(d) and therefore input tax credit is not available. The applicant's constitutional equality argument under Article 14 and submission that the building is itself the business were considered and rejected: the legislative scheme expressly restricts credit in such cases and the statutory provision governs the outcome. The Authority noted that the power to restrict input tax credit exists under the GST provisions and that differing commercial situations of taxpayers do not permit judicial re-writing of the statutory restriction. [Paras 6]Input tax credit is not available on inputs and input services used for construction of godowns meant to be rented out for commercial purposes to registered dealers.Final Conclusion: Advance Ruling: No input tax credit is available to the applicant on goods or services used for construction of godowns to be rented for commercial purposes; the application is admissible and the ruling is binding as per the Act. Issues Involved:The judgment involves issues related to the availability of Input Tax Credit (ITC) on inputs used for constructing godowns meant for commercial renting.Summary:The Authority for Advance Ruling, Tamil Nadu considered an application by a company seeking clarity on whether ITC is available on inputs used for constructing godowns intended for commercial renting to registered dealers. The company contended that since the godowns were constructed for business purposes, ITC should be allowed. However, the jurisdictional authorities cited Section 17(5)(d) of the CGST Act, which blocks ITC for goods or services used in constructing immovable property for one's own account. The company argued based on Article 14 of the Constitution of India, but the Authority held that the legislative scheme clearly restricts ITC in such cases, as per Section 17(5)(d). The ruling stated that no ITC is available on inputs for constructing godowns meant for commercial renting.Key Findings:- The company applied for an Advance Ruling on the availability of ITC for inputs used in constructing godowns for commercial renting.- Section 17(5)(d) of the CGST Act blocks ITC for goods or services used in constructing immovable property for one's own account.- The company's argument based on Article 14 of the Constitution was not accepted by the Authority.- The ruling concluded that no ITC is available on inputs for constructing godowns meant for commercial renting to registered dealers.