Input tax credit on machinery foundations allowed where structural support formed an integral part of plant and machinery.

Input tax credit on input services used to construct foundation and structural support for machinery in an API manufacturing unit was held admissible. The ruling treated reactors, filters, dryers, condensers, boilers and their supporting RCC and steel structures as integral to plant and machinery, because they ensured stability, alignment and vibration control for manufacture in the course or furtherance of business. On that basis, the works were not treated as disallowed civil construction under section 17(5)(c) of the CGST Act, 2017, and fell within the statutory definition of plant and machinery rather than immovable property barring credit.

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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 manufacture of Active Pharmaceutical Ingredients, in view of the restriction under section 17(5)(c) of the CGST Act, 2017.

Analysis: The applicant's manufacturing activity required installation of reactors, filters, dryers, condensers, boilers, and allied equipment on RCC and steel structures to ensure stability, alignment, and vibration control. Such equipment and the supporting foundation and structural works were held to be integral to the business of manufacturing APIs and therefore connected with the course or furtherance of business under section 16 of the CGST Act, 2017. The restriction in section 17(5)(c) applies to works contract services used for construction of immovable property, but the Explanation to section 17 specifically includes foundation and structural support within the expression "plant and machinery" and excludes only land, building, other civil structures, telecommunication towers, and pipelines laid outside the factory premises. Applying this definition, the supporting foundations and structural works for the machinery were treated as part of plant and machinery and not as disallowed civil structures. Reliance was also placed on the engineering report and the CBIC clarification concerning components integral to a functional plant network.

Conclusion: Input tax credit on the input services used for construction of foundation and structural support for the plant and machinery was held to be admissible and not hit by section 17(5)(c) of the CGST Act, 2017.

Ratio Decidendi: Foundation and structural support forming an integral part of plant and machinery, and used for making outward supply, fall within the statutory definition of plant and machinery and are not barred by the works contract restriction under section 17(5)(c).

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