2021 (3) TMI 1380 - AAR - GST

Input Tax Credit - goods/services received for construction of hotel building - work contract service received for construction of hotel building - goods/services received for construction of banquet hall which is rented further to customer - work contract service received for construction of banquet hall which is rented further to customer - input credit on work contract service or any goods/service received for construction of such hotel/banquet hall - expression plant machinery would include hotel/banquet building' under section 17 - specified goods viz. lifts, sanitary items, underground cables etc. fall under the expression plant machinery or not - freight paid to GTA on such items under RCM - Section 17(5)(c) 17(5)(d) of CGST Act. HELD THAT - Powers to restrict flow of credit also exist under Section 16(1) of the CGST Act which empowers the Central Government to impose conditions and restrictions on availing input tax credit. This shows a Legislative intent that input tax credit may not always be allowed partially or fully. Input tax credit provisions do not provide for that all the tax paid on inputs should be available as credit. Some credits have been denied under Section 17 in the Act itself and to allow flexibility, the Act provides that restrictions can be placed on availability of credit - under the GST regime, more input tax credit is available to tax payers along the entire supply chain as compared to the previous tax regime. Further, the transitional provisions under the CGST Act provide adequate credit of taxes accumulated under the erstwhile taxation regime to taxpayers in the GST regime. The legislative intent flows from the sovereign power given in the CGST Act, 2017 vide Section 16(1) of the Act. As per said provision input tax credit is allowed to a registered person subject to such conditions and restrictions as the Government thinks proper, against the supply of goods or services received which are used or intended to be used in the course or furtherance of his business. Here it is pertinent to mention that construction of an immovable property (hotel/restaurant or banquet hall) is a different business and hotel accommodation or renting of banquet hall is a different business. Thus supply chain is not the same for both the businesses. The thin line here is the break in the nature of business. For both the businesses input supply of goods or services are totally different from each other. Input supply of goods or services received for one business cannot be used for furtherance of other business. Lifts, Sanitary items and underground cables etc - HELD THAT - Lifts, Sanitary items and underground cables etc. being integral parts of a building are immovable properties as these items are attached to building for the permanent beneficial enjoyment of the said building and therefore cannot be termed as plant and/or machinery . Availability of input credit on the same and freight paid to GTA on such items under RCM, Repair maintenance of specified goods and Architect services etc. - HELD THAT - Section 17(5)(c)(d) blocks credit of input tax when works contract services are supplied for construction of an immovable property as well as when goods or services or both received by a taxable person for construction of an immovable property where immovable property is not plant and/or machinery . Since Lifts, Sanitary items and underground cables etc. are also immovable property therefore input tax credit of works contract service supplied for construction of these items or goods or services or both received for construction of these items together with construction of hotel/banquet hall will also not be available to the applicant, however this aspect of allowing input tax credit under Section 17(5)(c) (d) is pending decision before Hon'ble Supreme Court in case of M/s Safari Retreats Pvt. Ltd 2020 (3) TMI 1150 - SC ORDER . Repair Maintenance itself is not a construction service. Roll of repair or maintenance starts when a building or any immovable property comes into existence. Repair Maintenance is done on the already constructed buildings, civil structures etc. Further, input tax credit of the GST paid on Repair Maintenance service supplied for repair or maintenance of an immovable property is not denied under CGST Act. Therefore input tax credit of the GST paid on Repair Maintenance service is allowable under CGST Act.

Summary

Issues Involved:
1. Admissibility of input tax credit (ITC) on goods/services received for the construction of a hotel building.
2. Admissibility of ITC on work contract services received for the construction of a hotel building.
3. Admissibility of ITC on goods/services received for the construction of a banquet hall which is rented out.
4. Admissibility of ITC on work contract services received for the construction of a banquet hall which is rented out.
5. Whether the term "plant & machinery" includes hotel/banquet buildings under section 17, and accordingly the availability of ITC on work contract services or any goods/services received for such construction.
6. Whether specified goods like lifts, sanitary items, underground cables, etc., fall under "plant & machinery" and the availability of ITC on these items and related services.

Detailed Analysis:

1. Admissibility of ITC on Goods/Services for Hotel Building Construction:
The applicant sought to avail ITC on goods/services used for constructing a hotel building. The Authority for Advance Ruling (AAR) initially rejected the application citing that the issue was sub-judice. The Appellate Authority for Advance Ruling (AAAR) remanded the case for fresh consideration, requiring the AAR to examine the issues individually on merits.

2. Admissibility of ITC on Work Contract Services for Hotel Building Construction:
Similar to the first issue, the applicant sought ITC on work contract services for constructing a hotel building. The AAR initially rejected the application due to a pending writ petition in the Uttarakhand High Court. The AAAR directed the AAR to re-examine the issue.

3. Admissibility of ITC on Goods/Services for Banquet Hall Construction:
The applicant sought ITC on goods/services for constructing a banquet hall, which would be rented out. The AAR initially rejected the application, but the AAAR instructed the AAR to re-evaluate the issue.

4. Admissibility of ITC on Work Contract Services for Banquet Hall Construction:
Similar to the third issue, the applicant sought ITC on work contract services for constructing a banquet hall to be rented out. The AAR initially rejected the application, and the AAAR remanded the case for fresh consideration.

5. Inclusion of Hotel/Banquet Buildings under "Plant & Machinery":
The applicant argued that hotel/banquet buildings should be considered as "plant & machinery" under section 17, thereby allowing ITC on related work contract services and goods/services. The AAR rejected this claim, stating that the definition of "plant & machinery" explicitly excludes buildings or any other civil structures.

6. Admissibility of ITC on Specified Goods and Related Services:
The applicant sought ITC on specified goods like lifts, sanitary items, underground cables, etc., and related services such as freight paid to GTA, repair & maintenance, and architect services. The AAR ruled that these items are integral parts of the building and thus immovable properties, which are excluded from the definition of "plant & machinery." Consequently, ITC on these items and related services is not available. However, ITC on repair & maintenance services of these specified goods is allowed.

Conclusion:
- The AAR refrained from answering questions related to the availability of ITC on goods/services and work contract services for constructing hotel buildings and banquet halls as the matter is sub-judice.
- The AAR ruled that hotel/banquet buildings do not fall under "plant & machinery" as per section 17.
- ITC on specified goods like lifts, sanitary items, and underground cables, as well as related services, is not available as these are considered immovable properties.
- ITC on repair & maintenance services for specified goods is allowed under the CGST Act, 2017.