TaxTMI 
TaxTMI 
2021 (2) TMI 1293
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....RIAL DEVELOPMENT & INVESTMENT CORPORATION LIMITED, UDYOG BHAWAN, TILAK MARG, C-SCHEME, JAIPUR, Rajasthan - (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under: - a. Classification of goods and /or services or both Further, the applicant being a registered person (GSTIN is 08AABCR4695J1ZW as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT: 1. M/s Rajasthan State Industrial Development and Investment Corporation Ltd. (RIICO) (hereinafter referred to as the applicant) is a Rajasthan State Government owned Public Sector Undertaking. The corporation (RIICO) has been setup by the Rajasthan Government for the purpose of development of various industrial areas for the purpose of setting up of Industries and other supportive services in the state of Rajasthan. It has total 30 regional offices all across the State of Rajasthan for the purpose of development, i....
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....elopment Expenditure: - Development expenditure for creation of infrastructure for new industrial area is incurred generally in the initial years. These expenditures cover expenditure on land compensation, civil works like roads, drainage, approaches, culverts, rain water harvesting system, power supply related work like laying of new power lines, street light work, work for common facilities in the industrial area like Administrative office, Building for fire tenders, Post office/Bank building etc. Administrative cum financial sanction for incurring above development expenditure is sanctioned by competent authority for each new industrial area. (b) Nature of Special Maintenance: - This Includes improvement/up-gradation of industrial infrastructure in subsequent years after initial development of any industrial area is approved under above sanctions. Example: - Up-gradation of damage BT road to Cement Concrete Road (CC), Up-gradation of masonry drain to RCC drain, up-gradation of sodium vapour/Tube light based street light to LED based street light system etc. 6. The main activity of applicant is development and leasing of the developed land to various industrial/ non-industrial....
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.... industries including essential welfare and supporting services, e.g Post Office, Labour Colony, Residential Colony/Housing Complex & Township, Educational Institutions, RSEB, Power Station and water and Sewerage facilities, Dispensary or Hospital, Police, Fire service Station, Bank, Weigh Bridge, shops and markets, Cinema, Hotel and Restaurant and Petrol pump as mentioned in Rajasthan Land Revenue (Industrial Areas Allotment) Rules, 1959. 9. It is to be further submitted that the long-term leasing of more than 30 years of Industrial land to an Industrial unit is exempt as per entry no. 41 of the Notification No. 12/2017-Central Tax (rate) dated: 28.06.2017 (relevant entry is reproduced here in below for ready reference). The applicant charges upfront amount in the name of 'Development Charges' for recovery of the cost of land including the development expenses incurred for the development of such land from the allotted of the plot of land. On such development charges, no GST is payable in view of exemption provided in the Notification No. 12/2017- Central Tax (rate) as mentioned below: - Notification No. 12/2017- Central Tax (Rate) SI.No. Chapter, Section, Heading, Gro....
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....lopment of an area and allotment of plots in that area. The allotment starts only after the basic development work is carried out like roads, powerwater supply system etc. is done in that industrial area. Thus, the cost is incurred first by way of development expenses and thereafter the revenue is received when the plot of land is allotted. 13. The applicant debits the entire expenses incurred on the development and maintenance of the areas including GST charged by the contractor in the profit and loss account as revenue expenditure. As mentioned above, the land is stock of the applicant, therefore the inputs and input services procured for the development of such land is included in the cost of stock and charged to Profit and Loss account as revenue expenditure. It is not a capital expenditure, hence the same is not capitalized to any fixed assets in the books of accounts of the applicant. 14. At present the applicant is not availing Input tax credit (ITC) on the GST paid to the contractors from whom the input services of works contract / construction are taken. The applicant is charging the GST amount along with the expenditure as revenue expenditure in its Profit and Loss acco....
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.... as the case may be, services,- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.] (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: 3. The applicant fulfils all the above conditions. Firstly, the applicant is engaged in leasing of the plot of land for industrial and non-industrial purposes which is in the course or furtherance of the business of the applicant. The applicant receives services (work contract service) of various contractors and possesses the tax invoices issued by them. The GST paid by the applicant as charged by the supplier in their invoices is reflected in GSTR-2A of the appli....
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....lised to immovable property. Therefore, the restriction of ITC as provided in the above stated clause (c) and (d) of the Section 17(5) of the CGST Act, 2017 does not apply in case of the applicant. Hence the applicant is eligible to claim the Input tax credit of the works contract services and the services received by it for the development, upgradation, improvement and maintenance of the undeveloped land and it is not blocked under section 17(5) (c) & (d). 7. The above view is strengthened from the services of construction of a complex provided by the builder where the supply of service is taxable except where the entire consideration has been received after issuance of completion certificate as provided in clause (b) of entry 5 of Schedule-II of the CGST Act,2017. For providing the output services, builders take works contract services, procures inputs and other input services for the construction of buildings or complex. The builder is eligible to claim input tax credit of GST charged on such input & input services as per N. No. 11/2017-CT(Rate). 8. Further scope of supply under section 7(1) of the GST Act includes all forms of supply of goods and services, including a sale,....
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....ut forward by the legislation for claiming eligibility for input credit has been described in Section 16(1) and the benefit of apportionment is subject to Section 17(1) and (2). While considering the provisions of Section 17(5)(d), the narrow construction of interpretation put forward by the Department is frustrating the very objective of the Act, inasmuch as the petitioner in that case has to pay huge amount without any basis. Further, the petitioner would have paid GST if it disposed of the property after the completion certificate is granted and in case the property is sold prior to completion certificate, he would not be required to pay GST. But here he is retaining the property and is not using for his own purpose but he is letting out the property on which he is covered under the GST, but still he has to pay huge amount of GST, to which he is not liable. 20. In that view of the matter, in our considered opinion the provision of Section 17(5)(d) is to be read down and the narrow restriction as imposed, reading of the provision by the Department, is not required to be accepted, inasmuch as keeping in mind the language used in (1999) 2 SCC 361= 1999 (106) E.L.T. 3 (S.C.) (supr....
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....ax as is attributable to the taxable supplies. Therefore, the attributable input tax to the taxable supply is to be worked out. The manner of determination of such attributable input tax is provided in the Rule 42 of the CGST Rules, 2017. As per the said Rule the attributable inputs and input services exclusively used for effecting the exempt and taxable supply is to be determined and denoted separately and the common credit is to be apportioned based on turnover of taxable and exempt supply during the tax period. 13. As mentioned in the facts of the case that there is certain time gap between development of a particular area and leasing of plot in that area. The issue of claiming ITC arises at the time of incurring the expenses for the development whereas the output liability of GST arises at the time of leasing of plot after the completion of substantial development work in that area. Thus, the tax period of claiming ITC and tax period in which outward supply is made will differ and substantial time gap arises. Thus, one to one correlation of claiming ITC with respect to outward taxable supply of that particular area is not practically feasible. In this scenario there are two m....
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....but leasing of 'nonindustrial plot' of land/commercial plot of land is a taxable supply? C. PERSONAL HEARING The PH was held on 04.02.2021 at Room No. 2.11, NCRB, Statue Circle, Jaipur. Sh. Ashok Pathak (Finance Adviser), Sh. R. K. Limba (CGM) alongwith Sh Virendra Parwal (CA) authorized representative have appeared for Ph. During the PH, he reiterated the submissions already made in the application. D. COMMENTS OF THE JURISDICTIONAL OFFICER: Comments received from the Deputy Commissioner, SGST, Circle-N, Jaipur vide letter dated 17.09.2020 are reproduced as under: - Comment on Question No.1 1. Whether the Applicant can claim the ITC on the Input services of construction or works contract procured for the development of an Industrial area or the special maintenance expenses of the area? As per Section 16 of Central goods and service tax Act 2017 and Rajasthan goods and service tax Act 2017. Provided the conditional which we have to satisfied for taking the input tax credit the relevant portion of section 16 is re produce as under,- Section 16. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed75 and in the manner spe....
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....he amount towards the value of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or 78a [***] debit note pertains or furnishing of the relevant annual return, whichever is earlier: 78aa[Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the deta....
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.... Central Tax (Rate) but leasing of 'non-industrial plot' of land/commercial plot of land is a taxable supply? Commenting on Question No. 2 having no relevancy because the answer of question No. 1 is non-affirmative. E. FINDINGS, ANALYSIS & CONCLUSION: We have considered the submissions made by the applicant in their application for advance ruling as well as the additional submissions made by the applicant during the personal hearing. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. At the outset, we would like to state that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the RGST Act. 1. It is evident that the applicant is a Rajasthan State Government owned Public Sector Undertaking. The corporation (RIICO) has been setup by the Rajasthan Government for the purpose of development of various industrial areas for the purpose of setting up of Industries and other supportive services in the state of Raja....
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....r both which are used or intended to be used in the course or furtherance of business as per sub-section (1) of Section 16 of the Central Goods and Services Tax Act, 2017 which reads as under: - Section 16 (1) and (2) of the CGST Act "Eligibility and conditions for taking input tax credit. 16.(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying documents as may be prescribed; (b) he has received the goods or services or both." 5. Thus, Section 16 (1) of the CGST Act specifically provides that every regi....
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....inage, approaches, culverts, rain water harvesting system, power supply related work like laying of new power lines, street light work, work for common facilities in the industrial area like Administrative office, building for fire tenders, Post office/Bank building etc. is an immovable property. In fact, they have obtained land from state Government/private land and after the development work, the land is allotted on lease to the various persons who applies for the same. We find that as per Sub Section 5(c) and 5(d) of Section 17 of CGST Act, 2017 the input tax credit will not be allowed for works contract service and on the goods and service used by the taxable person on his own account. Section 17(5)(c) clearly states that no input tax credit would be available on the tax paid on works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract services. 8. It is admitted by the appellant that they are getting civil works done from the contractor. On perusal of fact submitted by the appellant, we find that the appellant has constructed roads drainage, approach....
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....r, the explanation gives a clarity that input tax credit on work contract service when supplied for construction of immovable property and goods or services or both received by a taxable person for construction of an immovable property is not allowed only to the extent of capitalisation. But in this case the applicant argued that entire expenses incurred on the development and maintenance of the areas including GST charged by the contractor in the profit and loss account as revenue expenditure and it is not a capital expenditure, we do not agree with the applicant's view that the land development work on immovable property is not a capital expenditure. The term 'extent to which capitalized', only suggests that the extent of such expenses are expected to be capitalized or else will be treated as capitalized to such immovable property. Since, the work done by the applicant on the acquired land is not of the nature of any type of repair or maintenance on immovable property, but a new fixed asset is constructed and it appreciate the value of the property/land. Hence, such expenses, which enhance the value of the property permanently and as per accounting convention, the e....