2019 (10) TMI 876 - AAR - GST

Input tax credit - Whether input GST credit can be availed by the applicant on the inputs i.e. Electrical Works, Pumps, Pumping systems and tanks, Lighting system, Physical security system and Fire System? - HELD THAT - Since the applicant is in the business of providing rental commercial space, it is not disputed that the goods or services or both obtained by the applicant are in the course or furtherance of business. Subject to the conditions and restrictions as may be prescribed, they are entitled to take input tax credit on the tax charged on any supply of goods or services or 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. The term construction includes re-construction, renovation, additions or alternations or repairs to the extent of capitalization to the said immovable property. The applicant has admitted that the works of electrical, structural, lighting, physical security and fire-fighting works are in the nature of works contract services and argued that they qualify as eligible credit under section 16 of the CGST Act. 2017. 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. It is clear that the items are fixed to the earth by foundation or structural support and are intended to be used for making an outward supply of provision of rental services and hence are covered under the definition subject to the exclusions - It is pertinent to note that the items do not have independent existence and are part and parcel of the entire building, a building with infrastructure. It is also seen from the intend of the applicant what is given on rental is the Space with all infrastructure and once these immovable properties come into existence, they get merged into the Common building space with modern infrastructure and facilities and hence are excluded from the definition of plant and machinery as applicable to section 17(5) of the CGST Act.

Summary

Issues Involved:
1. Eligibility of Input GST Credit on Electrical Works, Pumps, Pumping Systems and Tanks, Lighting System, Physical Security System, and Fire System.

Detailed Analysis:

1. Eligibility of Input GST Credit on Electrical Works, Pumps, Pumping Systems and Tanks, Lighting System, Physical Security System, and Fire System:

Applicant's Submissions:
- The applicant, engaged in building and managing industrial warehousing spaces, sought advance ruling on whether input GST credit can be availed on specific inputs used in their business operations.
- The applicant argued that under Section 16(1) of the CGST Act, 2017, they are entitled to take credit of input tax charged on any supply of goods or services used in the course or furtherance of business.
- The applicant claimed that Section 17(5) of the CGST Act restricts input tax credit on goods and services received for the construction of immovable property but excludes plant and machinery. They argued that the items in question qualify as plant and machinery and are movable, thus not restricted by Section 17(5).

Authority's Findings:
- The applicant is engaged in providing rental commercial space and procures various goods and services for fitting out the warehouse spaces.
- Section 16(1) of the CGST Act entitles them to take input tax credit on supplies used in the course or furtherance of business.
- However, Section 17(5) overrides Section 16(1) and disallows input tax credit on:
- Works contract services for construction of immovable property (other than plant and machinery).
- Goods or services received for construction of immovable property (other than plant or machinery) on the applicant's own account.
- The term "construction" includes re-construction, renovation, additions, or alterations to the extent of capitalization.
- The applicant's argument that the items are not capitalized as immovable property in their books of accounts was rejected. The nature of the asset as immovable property does not change based on its classification in the books of accounts.
- The items procured are considered works contract services resulting in immovable property, thus falling under the restriction of Section 17(5).
- The items do not have independent existence and are part of the building infrastructure, thus excluded from the definition of "plant and machinery" under Section 17(5).

Ruling:
- Input GST credit cannot be availed by the applicant on the inputs i.e., Electrical Works, Pumps, Pumping Systems and Tanks, Lighting System, Physical Security System, and Fire System as it is blocked under Section 17(5) of the CGST Act, 2017, and the Karnataka Goods and Services Tax Act, 2017.