2024 (6) TMI 12 - AAR - GST

Rotary car parking system classified as immovable property under Section 17(5)(d), Input Tax Credit denied for permanent installation.

The Tamil Nadu AAR held that a rotary car parking system is immovable property, not plant and machinery, making Input Tax Credit inadmissible under ... Input Tax Credit - blocked credits under Section 17(5)(d) - plant and machinery exclusion under Section 17 - immovable property / permanently fastened - works contract serviceImmovable property / permanently fastened - movable vs immovable - Rotary car parking system is an immovable property and not a movable chattel - HELD THAT: - The Authority applied the test of permanency articulated by the Supreme Court (whether the chattel can be used in the same position elsewhere or only after dismantling) and examined statutory definitions in the General Clauses Act, 1897 and the Transfer of Property Act, 1882. Although constituent parts can be dismantled, the system cannot be moved 'as it is' and is intended by the applicant to be enjoyed permanently with a specific civil foundation. Earlier judicial guidance that machinery embedded for permanent beneficial enjoyment is immovable was followed. On the facts - erection on a specific foundation within the applicant's land, absence of intention or plan to relocate, and functional dependence on the foundation - the rotary car parking was held to be permanently fastened and thus an immovable/civil structure. [Paras 8]Rotary car parking system is an immovable property.Blocked credits under Section 17(5)(d) - plant and machinery exclusion under Section 17 - works contract service - Input tax credit on the supply, installation and commissioning of the rotary car parking system is not admissible under Section 17(5)(d) - HELD THAT: - Having held the rotary parking to be an immovable/civil structure and having regard to the Explanation to Section 17, the Authority considered whether the system falls within the inclusion 'plant and machinery' or within the exclusion 'any other civil structures'. The primary object of the rotary system was found to be provision of parking space tied to and reliant on a civil foundation; its constituent parts and mode of erection rendered it analogous to civil structure rather than apparatus, equipment or machinery covered by the 'plant and machinery' inclusion. Further, the installation was found to amount to an addition to immovable property. Consequently the inward supply for construction/addition to immovable property (other than plant or machinery) falls within the ambit of Section 17(5)(d) and attracts the non availability of ITC. [Paras 9]ITC is not admissible on the rotary car parking system under Section 17(5)(d).Final Conclusion: The Authority ruled that the rotary parking system is an immovable civil structure and that input tax credit on its supply, installation and commissioning is barred by Section 17(5)(d) of the CGST/TNGST Acts; consequently ITC is not admissible. Issues Involved:1. Admissibility of Input Tax Credit (ITC) on the 'Rotary Parking System' under HSN Code: 8428.Summary:1. Admissibility of ITC on the 'Rotary Parking System' under HSN Code: 8428:The applicant, engaged in the service of Renting of Immovable Property, sought an advance ruling on the admissibility of ITC on the 'Rotary Parking System' classified under HSN Code: 8428. The applicant argued that the parking system is movable and intended for the furtherance of business, thus fulfilling the conditions of Section 16 of the CGST Act, 2017. They contended that the parking system is not an immovable property and should not fall under the blocked credits as per Section 17 (5) (c) and 17 (5) (d) of the CGST Act, 2017, as it is classified as 'plant and machinery'.However, the State and Central authorities refuted this claim, stating that the parking system requires a civil foundation and becomes a permanent fixture, thus classifying it as immovable property. The authorities argued that the system cannot be moved without dismantling, which aligns with the definition of immovable property under Section 3 (26) of the General Clauses Act, 1897, and Section 3 of the Transfer of Property Act, 1882. They further emphasized that the installation of the parking system involves construction activities, which are classified as works contract services related to immovable property.The Authority for Advance Ruling (AAR) examined the submissions and found that the parking system, once installed, becomes an integral part of the immovable property, as it requires a specific foundation and structural support. The AAR referred to judicial precedents and relevant sections of the General Clauses Act and Transfer of Property Act, concluding that the parking system is indeed immovable property. Consequently, it falls under the exclusion clause of 'any other civil structures' and does not qualify as 'plant and machinery'.Based on these findings, the AAR ruled that the Rotary Parking System is an immovable property and falls under the ambit of Section 17 (5) (d) of the CGST Act, 2017. Therefore, ITC is not admissible on the Rotary Parking System desired to be installed by the applicant.