Rotary Parking System under HSN 8428 denied ITC under Section 17(5)(d) as civil structure not plant machinery

The AAAR held that ITC on a Rotary Parking System under HSN 8428 is blocked under Section 17(5)(d) of CGST/TNGST Act, 2017. The appellant, who renders renting of immovable property services, sought to install the system for tenants and their customers. The Authority determined that the Rotary Parking System constitutes a civil structure rather than plant and machinery, as it requires specialized civil foundation, steel framework, and various integrated components. Since it forms part of the immovable property being rented and amounts to construction of immovable property, ITC eligibility is denied under the statutory provisions blocking credit on immovable property construction.

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Issues Involved:
1. Admissibility of Input Tax Credit (ITC) on the 'Rotary Parking System'.
2. Classification of the 'Rotary Parking System' as movable or immovable property.
3. Applicability of Section 17(5) of the CGST/TNGST Act, 2017.
4. Compliance with the definition of 'plant and machinery'.
5. Delay in pronouncing the original ruling.

Detailed Analysis:

1. Admissibility of Input Tax Credit (ITC) on the 'Rotary Parking System':
The appellant sought a ruling on the admissibility of ITC on the 'Rotary Parking System' under HSN code 8428. The AAR ruled that ITC is not admissible, leading to the appellant filing the instant appeal. The appellant argued that the supply of the rotary car parking system involves goods and installation services, and should be treated as a 'composite supply' with the supply of goods as the principal supply.

2. Classification of the 'Rotary Parking System' as Movable or Immovable Property:
The appellant contended that the 'Rotary Parking System' is movable and can be dismantled using simple screw driver technology. However, the authority found that the system involves various components like machines, equipment, motors, and a specialized foundation, making it a civil structure. The authority cited the General Clauses Act, 1897, and the Transfer of Property Act, 1882, to classify the system as immovable property. The 'permanency test' from the Supreme Court's decision in the Indian Oil Corporation case was applied, concluding that the system is permanently attached to the earth.

3. Applicability of Section 17(5) of the CGST/TNGST Act, 2017:
Section 17(5) of the CGST Act, 2017, blocks ITC on works contract services and goods or services received for the construction of immovable property, except for plant and machinery. The authority found that the rotary parking system does not qualify as 'plant and machinery' but as a civil structure, thus blocking ITC under Section 17(5)(d).

4. Compliance with the Definition of 'Plant and Machinery':
The appellant argued that the system should be considered 'plant and machinery' as defined in Section 17, which includes apparatus, equipment, and machinery fixed to earth by foundation or structural support. However, the authority noted that the system involves a specialized foundation and structural support, making it a civil structure excluded from 'plant and machinery'.

5. Delay in Pronouncing the Original Ruling:
The appellant highlighted the inordinate delay of 238 days in pronouncing the original ruling by the AAR, which they argued amounts to a denial of justice. The authority acknowledged this concern and advised the AAR to adhere to the timeframe fixed under Section 98(6) of the CGST/TNGST Acts, 2017.

Conclusion:
The authority upheld the AAR's ruling that the 'Rotary Parking System' is an immovable property, making the ITC on its purchase ineligible under Section 17(5)(d) of the CGST/TNGST Acts, 2017. The appeal filed by the appellant was dismissed.

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