TaxTMI 
TaxTMI 
TaxTMI 
2023 (9) TMI 165
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....s & GIDC had collected an upfront premium & was also entitled to periodical lease rentals. VEL being desirous of vacating the premises intended to transfer the leasehold rights in the said land for the balance period of lease with GIDC ie for 52 years to the applicant. 4. In terms of the said MoU, applicant is required to deposit an advance equivalent to 40% of the total consideration at the time of signing along with applicable GST; that tax invoice will be issued by VEL on receipt of Final Transfer Order from GIDC. The applicant intends to use the land for setting up/expanding its manufacturing facility for manufacture of chemicals to be used by the applicant in the course or furtherance of its business of manufacturing. 5. The primary reason for filing the application before the authority is to know their eligibility to claim ITC of the GST paid by them to VEL, post receipt of final tax invoices. 6. On merits, the appellant has contended as follows: * Section 16 of the CGST Act governs entitlement of ITC; that the section covers under its ambit the goods/services which have been used and are intended to be used in the course or furtherance of business; * a combined readin....
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....ble property; that this can cover goods/services viz cement, steel, construction contractor, electrical, plumbing, engineering, architect, etc ie goods/services which are consumed in the course of construction of immovable property; that this may include services directly or indirectly used for construction of immovable property- the services in question transfer of leasehold rights over the land cannot be construed for construction of an immovable property because if it is so, then most of the activities of a business would be covered under the said restriction entry, leading to an absurd interpretation of law; * that the intention to disallow the credit is only for the actual and physical activity of construction; that the definition of construction does not cover activity which is preceding construction; * the term 'for' used in section 17(5), ibid, would encompass only such goods & services inextricably linked with construction; * further, at the time of procuring the leasehold land, the applicant had not thought about whether the land will be used for construction of immovable property or not; * it cannot also be construed that VEL is providing services of construction....
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....escribed u/s 16 (1) and 16(2), ibid, for availing the ITC of the GST paid on the leasehold rights; * that the restriction u/s 17 (5)(d), ibid, is not relevant to the facts of their case; that only credit of tax paid on goods or services received on own account, for construction of immovable property is restricted; that their MoU is for acquiring leasehold rights of the land for the business purpose; * that a plain reading of section 17(5)(d), ibid, shows that the word/phrase 'for construction' means 'used for construction' of immovable property and hence would include goods/services such as bricks, cement, steel, architect services, engineer services, construction services, etc.; that only those goods and services which are used in the creation of immovable property should be covered by the restriction; that other goods / services received pre-facto i.e. prior to the creation of immovable property would not he covered under the restriction, e.g. real estate agent services, leasehold rights, etc. * that the primary qualification is that goods & services should have inextricable link with 'immovable property,' & should result in 'immovable property'; * that 'transfer fee' and....
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....up including erection, installation and commissioning of the said two plants. * that AAR in the above judgement misread the restriction that goods or services for construction of land is not allowed to hold that land is procured for construction of immovable property: * that further reliance placed in advance ruling on the GST Council Minutes is incorrect, as it does not lay down the position of law and is only reflective of the discussion of the GST Council. 10. In the meantime, a communication dated 26.5.2023 was received from Deputy Director, DGCEI, RU, Vapi, informing * that an inquiry was being conducted by them against the applicant on issue of non-admissibility of ITC in respect of transfer of leasehold right; * that the applicant had filed an application before AAR; * that they have filed a refund application for refund of GST on the belief that transactions related to transfer of leasehold right of Industrial plot are not under the purview of GST; * that the taxpayer have already availed the said ITC & has approached AAR seeking clarity about admissibility of fit in respect of acquisition of leasehold rights. 11. The applicant was provided a copy of the afore....
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....rence: (17) "business" includes-- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; 5[(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and] (i) any activity or transaction undertaken by the Central Government, a State Gover....
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....stered under this Act, or such other tax paying documents as may be prescribed; 1[(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;] (b) he has received the goods or services or both. 2[Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods or, 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.] 3[(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;] (c) subject to the provisions of 4[section 41 5[****]], the tax charg....
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.... Apportionment of credit and blocked credits.- ..... ...... ...... (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (c) 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 service; (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. Explanation.--For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; 15. The applicant has sought ruling on the admissibility of ITC, as is mentioned at para 7 supra. 'Goods' as defined u/s 2(52), CGST Act, 2017, means every kind of movable pro....
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....used or intended to be used in the course or furtherance of business; [e] what stands excluded is [a] ITC on works contract services when supplied for construction of an immovable property [other than P&M] and [b] goods or services received for construction of an immovable property (other than P&M) on his own account including when such goods or services are used in the course or furtherance of business. 19. 'Supply' as defined u/s 7(1)(a), ibid, includes all forms of supply made in the course or furtherance of business. Further section 7 (1A) read with entry No. 2(a) of Schedule II, ibid, states that any lease or license to occupy land is a supply of services. While, section 7(2)(a) read with Entry No. 5 of Schedule III, ibid provides that sale of land and sale of building shall not be regarded as supply. Thus, these provisions state that the sale of land and completed building shall not attract GST. 20. As far as GIDC is concerned, it initially grants a license i.e., right to enter upon its land for a particular purpose and subsequently grants a lease (i.e., right to possess the industrial plot) for a period of 99 years. The consideration for such rights given by GIDC is paid....
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....plicant has obtained leasehold rights from M/s. VEL in terms of an MoU, is an industrial plot, adjacent to their existing manufacturing plant & as per the applicant, they intend to set up a new manufacturing plant/expand its existing manufacturing plant. This further finds a re-affirmation in para R of Annexure III. However, moving forward in para DD in Annexure III, the applicant states that at the time of procuring the leasehold land, the applicant had not thought about whether the land will be used for construction of immovable property or not. The averment we therefore find, is contradictory. 24. Thus it is clear that the applicant wishes to use the service received from M/s VEL, in the form of leasehold rights to land of GIDC and intends to set up a new manufacturing plant/expand its existing manufacturing plant. This being the fact, clearly shows that the service of leasehold rights to land was received and is a precursor to construction being carried out on the said land to set up a new manufacturing plant/expand existing manufacturing facility. It is clearly hit by 17(5)(d) of CGST Act, 2017 also bringing the non obstante clause into play. For repetition, 17(5)(d), ibid, a....
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....AR/R/53/2021 dated 18.10.20211 in the case of M/s. GACL NALCO Alkalies & Chemcials P Ltd. The applicant has tried to distinguish the ruling. We have gone through the said ruling & find that the following paragraphs are relevant to the issue at hand and therefore for ease of understanding reproduce the same viz. 16. Applying the above principle to the instant case, we are of the opinion that in this case, the word 'or' in clause (d) of Section 17(5) of the CGST Act can be read as 'and' since it appears to give effect to the intention of the Legislature to allow input tax credit on the construction of plant and/or machinery. ....." iii. The subject land leasing service from GACL to GNAL hinges on said leased land. iv. We cannot brush aside the position of law that Legislature has excluded 'land' from plant and machinery. There must be an intent of Legislature to explicitly exclude the word 'land' in the expression. With this expression of Plant and Machinery excluding land, explicitly incorporated in the Blocked Credit section 17(5) CGST Act, We hold that Legislature has expressed its intent that ITC shall not be available in respect of services pertaining to land received by a....
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....er of all States as members - Rates of GST are jointly decided and recommendations made to Central and State Governments - It is highest deliberative forum to resolve issues arising out of the implementation of the GST and the Council embodies the spirit of Co-operative Federalism'. The Hon'ble Court further ruled that it cannot sit in appeal and postulate that the decision of the Council is not what they have unwaveringly held it to be. 19. In conspectus of aforementioned discussion and findings, we pass the Ruling based on the following five grounds: i. The expression 'plant and machinery' excludes land. As expounded at para 13 of this Ruling, with this expression of Plant and Machinery excluding land, explicitly incorporated in the Blocked Credit section 17(5) CGST Act, We hold that Legislature has expressed its intent that ITC shall not be available in respect of services pertaining to land received by a taxable person for construction of an immovable property including when such services are used in the course or furtherance of business. ii. The word used by the Legislature in Section 17(5)(d) CGST Act is 'for' and not 'used', thereby the intention of Legislature was to ....
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....ect of the following, namely:- (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. Explanation.-For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; From the above provisions it is seen that in respect of immovable property the Credit of tax paid on goods or services received on own account, for construction of immovable property is available only when such immovable property is a 'Plant and Machinery'. In the instant case the contract is a lease contract of the built-building for use as an extended corporate office for accommodation of record & as documentation room and it is for the business purpose of the applicant. The lease allotment letter do not spell of lease for any construction activity on the closed space leased for business purposes. Hence, the upfront premium made is the lease rentals as per the allotment o....