2020 (6) TMI 482 - AAR - GST

Input Tax Credit - input services - Programme management consultancy - Marketing Consultancy - Land levelling and other related works - Roads - Water, electricity, Drainage Infrastructure - Other related works for developing SIPC - HELD THAT - The applicant is a port trust running a major port at Kandla. Under the directions of the ministry of shipping to utilize the land resources with the endeavour for developing port based smart city, they are developing one of India's first Smart Industrial Port City (SIPC) within Gandhidham-Kandla-Adipur Complex as part of the Sagarmala project. They will auction the land under the SIPC for 60 or more years, for a consideration, in the form of one time upfront premium, liable for GST, under the category of Real Estate Service (HSN 9972). We observe that the applicant is engaged in development of port based smart city i.e. Smart Industrial Port City (SIPC) within Gandhidham-Kandla-Adipur Complex. The said project development is nothing but construction of an immovable property and any project development services or goods or works contract used for construction of an immovable property shall attract the provisions of clauses (c) and (d) under sub-section (5) of Section 17 of the CGST Act, which specifically deny input tax credit in respect of works contract services or goods and services used for construction of an immovable property - the said project development services of Programme management consultancy, Marketing Consultancy, Land levelling and other related works, Roads, Water, electricity, Drainage Infrastructure and other related works for developing SIPC are not eligible for Input Tax Credit under the CGST Act, 2017. The Input Tax Credit shall be NOT be available under the CGST Act, 2017, on the project development services like Programme management consultancy, Marketing Consultancy, Land levelling and other related works, Roads, Water, Electricity, Drainage Infrastructure and other related works for development of SIPC i.e. construction of an immovable property.

Summary

Issues:

- Availability of Input Tax Credit under the Central Goods and Services Tax Act, 2017 for project development services related to the construction of an immovable property for the development of a Smart Industrial Port City (SIPC).

Analysis:

The applicant, a port trust, is developing a Smart Industrial Port City (SIPC) within Gandhidham-Kandla-Adipur Complex under the ministry of shipping's directions. The project involves developing mixed-use residential areas, institutional facilities, commercial spaces, recreational areas, and an industrial park with logistic facilities. The applicant plans to auction the land under SIPC for a long-term premium, subject to GST under Real Estate Service (HSN 9972). The issue revolves around the availability of Input Tax Credit for various project development services incurred by the Deendayal Port Trust.

The Central Goods and Services Tax Act, 2017, allows registered persons to claim Input Tax Credit on goods or services used in the course or furtherance of their business. However, Section 17(5) of the CGST Act specifies goods and services for which Input Tax Credit is not available. Notably, this section denies credit for works contract services or goods and services used for the construction of an immovable property. Since the development of SIPC involves constructing immovable properties, the project development services like Programme management consultancy, Marketing Consultancy, Land levelling, Roads, Infrastructure, and related works are ineligible for Input Tax Credit under the CGST Act.

In conclusion, the Authority for Advance Ruling ruled that Input Tax Credit shall not be available under the CGST Act, 2017, for project development services related to the construction of an immovable property for the development of SIPC. This decision aligns with the provisions of Section 17(5) of the CGST Act, which specifically excludes works contract services or goods and services used for immovable property construction from claiming Input Tax Credit.