2020 (8) TMI 906 - AAAR - GST

Input Tax Credit - inward supply of goods or work contracts services for construction maintenance of warehouse / building - goods purchased for the purpose of construction maintenance of Warehouse such as Vitrified Tiles Marble Granite ACP Sheet Steel Plates TMT Tor(Saria) Bricks Cement Paint and other construction material - GST paid on Work contract service received from registered unregistered Contractor for construction maintenance contract of building - GST paid on goods purchased works contract service received during the FY 2017-18 for the purpose of construction maintenance of Warehouse - section 17(5) (d) of CGST Act 2017 - HELD THAT - As per the Section 17 (5) of CGST Act the Input tax credit shall not be available on the goods and 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 definition of immovable property is not provided under GST Act. According to section 3(26) of the General Clauses Act 1882 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 . According to section 3 of the Transfer of Property Act 1882 Immovable property means Immovable property does not include standing timber growing crops or grass - It is undisputed as per the submissions of appellant as well as from the Order of AAR that appellant intends to construct building / warehouse which is immovable property. Appellant never segregated construction from maintenance but rather has used only comprehensive phrase Construction and Maintenance . He has never spelt out accounting treatment of inward supply of goods or services or both received by him for construction of an immovable property. The explanation appended at the end of sub-section allows ITC to the extent it is not capitalised. Capitalisation or Non-capitalisation of these expenses is certainly not a permanent indelible mark in the account books. These accounting entries may be modified altered or deleted as per prevailing/ changing contingencies. These entries are not static but dynamic. Since such a question has not been raised we are not inclined to discuss it. Input Tax Credit of GST paid on goods purchased for the purpose of construction maintenance of Warehouse such as Vitrified Tiles Marble Granite ACP Sheet Steel Plates TMT Tor(Saria) Bricks Cement Paint and other construction material cannot be claimed to the extent of capitalisation in terms of clause (d) of section 17(5) of GST ACT 2017 - Input Tax Credit of GST paid on Works contract service received from registered unregistered Contractors for construction maintenance contract of building cannot be claimed to the extent of capitalisation in terms of clause (d) of section 17(5) of GST ACT 2017 - Input Tax Credit of GST paid on goods purchased works contract service received during the FY 2017-18 for the purpose of construction maintenance of Warehouse cannot be claimed to the extent of capitalisation in terms of clause (d) of section 17(5) of GST ACT 2017.

Summary

Issues Involved:
1. Interpretation of section 17(5) of the CGST Act regarding Input Tax Credit (ITC) on goods and services for construction and maintenance of warehouse.
2. Admissibility of ITC on goods purchased and work contract services received for construction and maintenance of warehouse.

Analysis:

Issue 1: Interpretation of section 17(5) of the CGST Act regarding ITC on goods and services for construction and maintenance of warehouse:
The appeal was filed against the order of the Authority for Advance Ruling (AAR) regarding the admissibility of ITC on goods purchased for construction and maintenance of a warehouse. The Appellate Authority upheld the ruling of the AAR that no ITC of GST paid on goods and work contract services received for construction and maintenance of the warehouse is admissible under section 17(5) of the CGST Act, 2017. The section prohibits the availability of ITC on goods and services received for the construction of an immovable property on the taxpayer's account, including when used in the course of business. The Appellate Authority clarified that the definition of immovable property includes land and attached structures, which the appellant intended to construct. The appellant's arguments regarding the break in the tax chain and cascading effect of taxation were not substantiated, leading to the rejection of those claims.

Issue 2: Admissibility of ITC on goods purchased and work contract services received for construction and maintenance of warehouse:
The Appellate Authority addressed the questions raised before the AAR and reiterated that ITC of GST paid on goods purchased and work contract services received for construction and maintenance of the warehouse cannot be claimed to the extent of capitalization under section 17(5)(d) of the CGST Act, 2017. The appellant's contentions regarding the accounting treatment of expenses for maintenance of the warehouse and the lack of differentiation between construction and maintenance in the questions raised were discussed. The Appellate Authority emphasized that the appellant did not provide a specific question regarding the accounting treatment of inward supplies for construction, and hence, the issue was not further deliberated. Additionally, the appellant's inquiry for a specific period (FY 2017-18) did not indicate any change in the law related to ITC entitlement during that period.

In conclusion, the Appellate Authority upheld the AAR's decision and held that ITC on goods and services for the construction and maintenance of the warehouse cannot be claimed to the extent of capitalization as per section 17(5)(d) of the CGST Act, 2017. The appellant's arguments regarding the tax chain, cascading effect, and accounting treatment were not found to be valid based on the provisions of the law and the specific questions raised.