ITC on Furniture

[Kaustubh Karandikar]

XYZ is buying plywood. He is getting the furniture done from this plywood from a carpenter. The resultant furniture is immovable in nature. Can XYZ take credit of the GST charged by the plywood supplier and the GST charged by the carpenter?

[KASTURI SETHI]

Not admissible, it being part of construction/works contract and hit by Section 17 (d) of CGST Act. Not allowed at all.

[SHARAD ANADA]

The resultant furniture is immovable in nature hence ITC is not available.

Refer Sec. 17(5)(d) of CGST Act 2017

(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

The term ‘immovable property’ has not been defined under the CGST Act. Thus, reference is made to the definition of immovable property under the General Clauses Act, 1987 , Black’s Laws Dictionary which is as under:

“Immovable property shall include land. benefits to arise out of land and things attached to the earth. or permanently fastened to anything attached to the earth” -

As per General Clauses Act / Maharashtra Stamp Act.

“Immovable property means a property that cannot be moved; an object so firmly attached to land that it is regarded as a part of land”-As per Black ‘s Law Dictionary

Section 3(26) of the General Clauses Act includes within the definition of the term "immovable property" things attached to the earth or permanently fastened to anything attached to the earth. The term "attached to the earth" has not been defined in the General Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the following meaning to the expression "attached to the earth":

"(a) rooted in the earth, as in the case of trees and shrubs;

(b) imbedded in the earth, as in the case of walls and buildings;

(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached."

In case of Quality Steel Tubes (P) Ltd. V/s. Collector of Central Excise. (U.P.) [1995 (75) ELT 17 (S.C.)] = 1994 (12) TMI 75 - SUPREME COURT OF INDIA

“Goods which are attached to the earth and thus become immovable do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold.

Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act.”

Municipal Corporation of Greater Bombay vs Indian Oil co. Ltd [AIR 1991 SC 686] = 1990 (11) TMI 407 - SUPREME COURT

“Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the later place? If the answer is yes to the former it must be a moveable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth.”

The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the later place? If the answer is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth. If the answer is yes to the latter it is attached to the earth."

The test laid down by the Supreme Court is that if the chattel is movable to another place as such for use, it is movable but if it has to be dismantled and reassembled or re-erected at another place for such use, such chattel would be immovable

[Kaustubh Karandikar]

Shri Sharad Ji

Very nicely elaborated. Thanks.

[Himansu Sekhar]

Nicely described about the immovable properties. Thank you sir

AI Summary

Input tax credit denial for goods used in constructing immovable property - credit blocked under construction-of-immovable-property rule. Input tax credit is unavailable for goods and services used to construct or create immovable property; plywood and carpentry services that produce furniture permanently affixed to land are excluded. The legal test focuses on attachment to the earth and permanency: items movable without dismantling remain goods, whereas items requiring dismantling and re erection are treated as immovable and fall outside credit eligibility.