Input Tax Credit on Works Contract denied where breakwater is an integrated immovable structure; ITC unavailable and classification not ruled.

Decision addresses entitlement to input tax credit for GST paid on works contract services for constructing a permanently embedded breakwater. Applying the rule that ITC is blocked for works contract services used in construction of immovable property (excluding plant and machinery), the Authority held the breakwater to be an integrated, permanent civil structure whose constituent items lose separate character when incorporated, and therefore ITC is not available. The Authority also noted invoice classification non compliance and time limit provisions for ITC claims, and declined to rule on the contractor's supply classification under the rate notification.

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Issues: (i) Whether the applicant is eligible to avail input tax credit (ITC) of GST paid on works contract services for construction of the breakwater wall adjacent to its jetty.

Analysis: The Authority examined the factual scope of the contract (composite works contract by Larsen & Toubro) and the statutory scheme in Section 17(5) of the Central Goods and Services Tax Act, 2017 which blocks ITC for works contract services supplied for construction of immovable property (other than plant and machinery). The Authority reviewed the definition of "plant and machinery" in the Explanation to Section 17(6), the distinction between "plant and machinery" and "plant or machinery" as addressed by the Supreme Court, and the subsequent retrospective legislative amendment (Section 124 of the Finance Act, 2025 and Notification No. 16/2025-Central Tax dated 17.09.2025) which substituted "plant and machinery" into clause (d) and introduced Explanation 2. The technical record (Engineers India Ltd. report) and contract scope show the breakwater as an integrated, permanently embedded civil structure composed of core, armour and accropodes, constructed on the seabed and functioning collectively to dissipate wave energy. The Authority found the services obtained were works contract services for construction of an immovable civil structure; individual constituent items (rocks, accropodes) lose separate character once integrated into the permanent structure. The Authority further considered invoice non compliance (absence of requisite SAC/HSN digits under Rule 46) and the time limit for claiming ITC under Section 16(4). The Authority also declined to answer the question on classification of the contractor's supply under Notification No. 11/2017-Central Tax (Rate) because a ruling on that point would affect rights of the supplier who is not a party to the AAR proceeding.

Conclusion: The applicant is not eligible to avail input tax credit of GST paid on the works contract services for construction of the breakwater wall; no ruling is given on the contractor's classification under Notification No. 11/2017-Central Tax (Rate).

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