2020 (3) TMI 618 - AAR - GST

Input Tax Credit - 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 - 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 - whether ITC can be claimed in full or not? HELD THAT - As per the Section 16 of CGST Act, 2017, every registered person shall entitle for ITC subject to such conditions and restriction as may be prescribed. As per the Section 17(5) of CG5T Act mentioned above, 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. In the present case, the applicant constructed the building/warehouse which is a immovable property and as per the exclusion clause 17(5) (d)of CGST Act, 2017, the input tax credit is not available on the goods and services used in construction of immovable property. The Section 17(5) of CGST Act is an exclusion clause in spite of the goods or services used in the course or for furtherance of his business as the Section 16 of CGST ACT, it is clearly mentioned that the entitlement of ITC is subject to the condition and restriction. The view of applicant that they are entitled for ITC in view of Section 16 is incorrect as per law - Further the applicant stated that if the ITC is not allowed as per the Section 17(5) (d) then it is unwarranted, unreasonable, arbitrary, unconstitutional, illegal, violation of fundamental right, double taxation is baseless as the Section 17(5)(d) of CGST Act is very clear and there is no scope of interpretation but in spite of clearcut law, the Applicant has wrongly interpreted the Section to avail the benefit of inadmissible ITC. The submission of Applicant that if ITC is not admissible, it would render building now constructed for renting out uncompetitive is also not correct as the said provision of Section 17(5)(d) of CGST Act, is applicable to all not only to the applicant only. Thus, it can be concluded that the ITC is not admissible on the goods and services received and used in the construction of warehouse used for letting out on rent as per the Section 17(5)(d) of CGST Act, 2017. Thus, it is finally held that no ITC 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 is admissible under Section 17(5) of CGST Act, 2017; no ITC of GST paid on work contract service received from registered unregistered Contractor for construction maintenance contract of building is admissible under Section 17(5) of CGST Act, 2017; and; no ITC of GST paid on goods purchased works contract service received during the FY 2017-18 for the purpose of construction maintenance of Warehouse is admissible under Section 17(5) of CGST Act, 2017.

Summary

Issues:

1. Whether Input Tax Credit (ITC) of GST paid on goods purchased for construction & maintenance of Warehouse can be claimed in full?
2. Whether ITC of GST paid on work contract service received for construction & maintenance of building can be claimed in full?
3. Whether ITC of GST paid on goods purchased & works contract service received during FY 2017-18 for construction & maintenance of Warehouse can be claimed in full?

Detailed Analysis:

Issue 1:
The applicant sought clarification on claiming ITC of GST paid on goods used for constructing and maintaining a warehouse for renting out. The Department's view was that as per Section 17(5)(d) of CGST Act 2017, no ITC is admissible on goods and services used in constructing a property for letting out. The applicant argued that denying ITC would lead to double taxation and be unconstitutional. The Authority analyzed the provisions of Section 16 and 17(5) of the CGST Act, concluding that ITC is not available on goods and services used in constructing an immovable property, as per Section 17(5)(d).

Issue 2:
Regarding the ITC of GST paid on work contract services for building construction and maintenance, the Authority held that no ITC is admissible under Section 17(5) of CGST Act 2017. The applicant's argument that denial of ITC would render the building uncompetitive was rejected, emphasizing that the law clearly states the inadmissibility of ITC in such cases.

Issue 3:
For the ITC of GST paid on goods and services during FY 2017-18 for warehouse construction, the Authority ruled that no ITC is admissible under Section 17(5) of CGST Act 2017. The applicant's plea that lack of clarity in the law should allow the ITC was dismissed, reiterating the clear provisions of the Act.

The ruling stated that ITC of GST paid on goods and services for warehouse construction and maintenance is not admissible under Section 17(5) of CGST Act 2017. The ruling's validity is subject to provisions under section 103(2) unless declared void under Section 104(1) of the GST Act.

This comprehensive analysis covers the issues raised, the arguments presented, and the final ruling by the Authority for Advance Ruling, Madhya Pradesh.