Input tax credit allowed on foundation and structural support for plant and machinery integral to manufacturing operations.

Input tax credit is admissible on works contract services used to construct foundation and structural support for plant and machinery when those supports are integral to machinery used in manufacturing and business operations. The Explanation to Section 17 treats plant and machinery as including apparatus, equipment and machinery fixed to earth by foundation or structural support, together with such foundation and support, while excluding only specified civil structures. Because the solvent recovery and effluent treatment plants required such support for stability, vibration control and proper functioning, the related construction services were not blocked by Section 17(5)(c).

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Issues: Whether input tax credit is admissible on input services used for construction of foundation and structural support for plant and machinery installed within the factory for recovery of solvents and treatment of wastewater in API manufacture.

Analysis: The registered person was found to be using the solvent recovery and effluent treatment plants in the course of its business of manufacturing and supplying APIs, so the related construction services were business inputs. The restriction in Section 17(5)(c) applies to works contract services used for construction of immovable property, but the Explanation to Section 17 defines plant and machinery to include apparatus, equipment and machinery fixed to earth by foundation or structural support, and also includes such foundation and structural support while excluding only land, building, other civil structures, telecommunication towers and pipelines laid outside the factory premises. The foundations and supporting structures were treated as integral to the machinery, not as excluded civil structures, and the supporting evidence showed that the machinery required such structures for stability, vibration control and proper functioning.

Conclusion: Input tax credit on the input services used for construction of foundation and structural support for the plant and machinery is admissible and is not blocked by Section 17(5)(c) of the CGST Act, 2017.

Ratio Decidendi: Foundation and structural support that are integral to plant and machinery fall within the statutory definition of plant and machinery under the Explanation to Section 17, and works contract services used for such construction are not hit by the block under Section 17(5)(c).

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