2019 (2) TMI 1009 - AAR - GST

Input tax credit - inward supplies for construction of the warehouse - section 17(5) (c) (d) of the GST Act - immovable property or not? - property of the warehouse being built - Held that - The Vendor is not supplying the floor as a pre-fabricated removable structure. The civil work undertaken is meant not only for fixing the prefabricated structure built upon the floor but also for developing the floor space itself - Beneficial enjoyment of the floor so inalienably attached to the land is integral to the enjoyment of the warehouse. The Applicant is constructing a warehouse that is intended to be used as a permanent structure, and associated with beneficial enjoyment of the land on which it is being built. The technology used for the construction of the warehouse involves the application of pre-fabricated structures and also civil work for supporting the pre-fabricated structure and developing the floor of the warehouse. The warehouse cannot be conceived without beneficial enjoyment of the civil structure embedded on earth. The warehouse being constructed is, therefore, an immovable property, and the input tax credit is not admissible on the inward supplies for its construction, as the credit of such tax is blocked under section 17(5) (d) of the GST Act. The warehouse being constructed is immovable property. The input tax credit is, therefore, not admissible on the inward supplies for construction of the said warehouse, as the credit of such tax is blocked under section 17(5)(d) of the GST Act.

Summary

Issues Involved:
1. Admissibility of input tax credit on inward supplies for construction of a warehouse.
2. Determination of whether the warehouse is considered movable or immovable property under the GST Act.

Issue-wise Detailed Analysis:

1. Admissibility of Input Tax Credit on Inward Supplies for Construction of a Warehouse:

The Applicant seeks a ruling on whether the input tax credit (ITC) is admissible on the inward supplies for constructing a warehouse using pre-fabricated technology on leasehold land. The application is admitted under section 97(2)(d) of the CGST/WBGST Act, 2017, as the issue is neither pending nor decided in any proceedings under the GST Act.

The Applicant describes the warehouse as a "Prefabricated Warehousing System" purchased from a vendor. The system is movable and can be dismantled and reconstructed at a different location. The Applicant argues that since the system is movable, the provisions of section 17(5)(c) & (d) of the GST Act, which block ITC on inward supplies for construction of immovable property, are not applicable.

2. Determination of Whether the Warehouse is Considered Movable or Immovable Property:

Definition and Legal Precedents:
- "Immovable property" is not defined under the GST Act. Section 2(52) of the GST Act defines "goods" as all kinds of movable properties but includes things attached to or forming part of the land agreed to be severed before supply or under a contract of supply.
- Recourse is taken to other Acts like the General Clauses Act, 1897, and the Transfer of Property Act, 1882, to define "immovable property" as land, benefits arising out of the land, and things attached to the earth or permanently fastened to anything attached to the earth.

Case Law Analysis:
- In Triveni Engineering & Industries Ltd, the Supreme Court emphasized the intention and factum of fastening to determine if an article is permanently fastened to the earth.
- In Solid & Correct Engineering Works, the Supreme Court held that a machine fixed with nuts and bolts to a foundation without the intent to permanently attach it to the earth is not immovable property.
- In Sirpur Paper Mills Ltd, the Supreme Court ruled that a machine attached to earth for operational efficiency does not become immovable property if it can be dismantled and sold.

Application to the Present Case:
- The Applicant is constructing a warehouse on leased land for thirty years, indicating an intention for long-term beneficial enjoyment.
- The concerned officer pointed out that the system refers to pre-fabricated structures used for constructing the warehouse, not the warehouse itself.
- The warehouse's construction involves civil work for developing the floor, which is integral to the warehouse's beneficial enjoyment.
- The warehouse cannot be relocated by merely unfixing the pre-fabricated structures, as dismantling the floor would cause substantial damage to the foundation.

Conclusion:
The warehouse being constructed is intended to be a permanent structure associated with the beneficial enjoyment of the land. The use of pre-fabricated structures and civil work for the floor's development makes the warehouse an immovable property. Consequently, ITC is not admissible on the inward supplies for its construction, as blocked under section 17(5)(d) of the GST Act.

Ruling:
The warehouse being constructed is immovable property. Therefore, the input tax credit is not admissible on the inward supplies for constructing the said warehouse, as the credit of such tax is blocked under section 17(5)(d) of the GST Act. This ruling is valid subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.