Installation of Rain Water Harvesting

[S.C. WADHWA]

Dear Experts,  

We have installed two rain water harwesting pits in our factory. This is as per requirement of Haryana Ground water Authority. We are manufacturers of Food items both as taxable and exempted. Now my query is whether we will get common ITC or full. If Full, please quote us any circular or judgement

REGARDS,

WADHWA

[Shilpi Jain]

In my view credit should be eligible as a common credit if the pit is used for both taxable and the exempted product.

However, department may dispute credit considering it is blocked u/s 17(5)(c)/(d)

Though in my view that blocking should not apply.

[KASTURI SETHI]

Common ITC is allowed and NOT full.

Rain harvesting pit is covered under 'plant' as per Explanation given below sub-section 6 of Section 17 of CGST Act. As per legal dictionary meaning, 'for a manufacturer 'plant' means 'apparatus' also which is used for manufacturing the product. Thus it is covered under 'Exclusion clause' and not hit by Section 17 (5)(d).

The department may go for 'civil structure' which is out of exclusion clause. Since the burden of proof is cast upon the manufacturer (registered person) under Section 155 of CGST Act, you are to prove that rain harvesting pit is covered under the meaning and scope of 'plant'. The Hon'ble Supreme Court has defined, 'what is plant'. You can take the shelter of that definition to counteract the department's contention, if such situation arises.

You will have to be pro-active.

AI Summary

Input tax credit entitlement: common ITC for rainwater harvesting pits, not full credit, subject to proof against civil structure challenge
Where rain water harvesting pits are used for both taxable and exempt manufacture, input tax credit should be treated as common (apportioned) rather than full; the department may contend the pits are a civil structure and block credit, so the registered person must prove the pits qualify as plant/apparatus used in manufacturing, relying on judicial definitions and the statutory burden of proof to support entitlement.