Eligibility to avail ITC on electrical works for factory expansion denied where installations are not plant and machinery and form immovable property

Input tax credit for electrical installations in factory expansion was held inapplicable because such installations do not qualify as plant and machinery under the explanation to Section 17(5) of the CGST Act; therefore GST paid on those installations is blocked under the input tax credit exclusion. The installations (LT panels, bus-ducts, wiring, lighting, lightning protection and associated civil works) were characterised as forming part of immovable property by annexation and permanent enjoyment, not as discrete apparatus, equipment or machinery, and accordingly ITC on related supplies is unavailable.

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Issues: (i) Whether Input Tax Credit (ITC) is eligible on electrical works carried out for expansion of factory for manufacturing activity; (ii) Whether and on what basis the timeline arises to avail ITC on tax invoice raised by supplier to bill the 'advance component' of the contract and subsequent adjustment in service bills.

Issue (i): Whether the electrical installation works (including LT panels, busducts, LT electrical works, lightning protection, light fixtures and associated civil works) qualify as 'plant and machinery' or otherwise fall outside the scope of blocked credits under Section 17(5)(c) and 17(5)(d) of the CGST/TNGST Acts, thereby permitting availment of ITC.

Analysis: The Authority examined the statutory entitlement under Section 16(1) and the blocking provisions in Section 17(5) including the Explanation defining 'plant and machinery'. It analysed the contractual terms (including delivery of 'permanent work'), the nature and purpose of annexation, and applied judicial tests (nature of annexation, object of annexation, intendment of parties, functionality, permanency and marketability). The Authority considered submissions and comparative rulings and distinguished cases where items directly related to transmission or outward supply were held to be plant and machinery. It concluded that the electrical installation as a whole and its components do not constitute equipment, machinery or an 'apparatus' as contemplated in the Explanation, that the object and intendment indicate permanent beneficial enjoyment by the immovable property, and that the items lack independent marketability or independent functional existence in the instant facts.

Conclusion: ITC on the electrical installation works for the new factory is not eligible and is blocked under Sections 17(5)(c) and 17(5)(d) of the CGST/TNGST Acts; the AAR ruling disallowing ITC is upheld in favour of the Revenue.

Issue (ii): Whether the timeline to avail ITC on the 'advance component' billed by the supplier requires determination given the contract and invoices in question.

Analysis: The Authority treated the timeline issue as subordinate to the primary question of ITC eligibility. Having held that ITC on the contract is not available on merits, the factual and temporal question regarding the treatment of advance invoices and subsequent adjustments becomes moot in the context of this contract.

Conclusion: The question on the timeline to avail ITC on the 'advance component' does not arise and is not answered because the main query on ITC availability has been answered in the negative.

Final Conclusion: The Advance Ruling No.32/ARA/2025 dated 18.08.2025 is upheld and the appeal is dismissed; the electrical installation works in the facts of this case form part of immovable property and ITC thereon is blocked under Section 17(5)(c) and 17(5)(d).

Ratio Decidendi: Where electrical installations cease to have independent existence, are intended for permanent beneficial enjoyment of the immovable property, and do not satisfy the Explanation to Section 17 as 'plant and machinery' (apparatus, equipment or machinery fixed to earth and used for making outward supply), the ITC on such supplies is blocked under Sections 17(5)(c) and 17(5)(d) of the CGST Act, 2017.

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