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2021 (12) TMI 213 - AAR - GSTInput Tax Credit - Tax paid on cost proposed to be incurred in relation to activity mentioned in Annexure attached with the application - Section 16 of the CGST Act, 2017 - HELD THAT - According to Section 16 (1) of the CGST Act, 2017, every registered person is entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used by him in the course or furtherance of his business. We find that apart from conditions as laid down under Section 16 of the CGST Act, 201 7; Section 17 provides for restrictions and factual position and situations where ITC would not be available. When the goods or services are bought for construction of immoveable property which will be used in the course of business, the GST paid on such good or service is also not eligible- to be claimed as Input tax credit if the immoveable property is constructed for own purpose, as the owner will become the end user and he cannot avail ITC of cost incurred on construction goods, as there is a break in the tax chain. According to the provisions of Sec. 17(5) read with the explanation to it, credit of civil structure is covered under blocked credit. Clause (c) and (d) of section 17(5) restricts ITC in respect of works contract services and goods or services used towards construction of immovable property As such, input tax credit (ITC) of GST paid in relation to building or any other civil structure is not available. The Input Tax Credit of Tax paid on cost proposed to be incurred in relation to activity mentioned is not admissible.
Issues Involved:
1. Admissibility of Input Tax Credit (ITC) on costs incurred for Building Work. 2. Admissibility of ITC on costs incurred for Electrical Work. 3. Admissibility of ITC on costs incurred for Air Condition Work. 4. Admissibility of ITC on costs incurred for Fire Protection Work. 5. Admissibility of ITC on costs incurred for Mechanical Work. Detailed Analysis: 1. Admissibility of ITC on Building Work: The applicant sought ITC on various building-related expenses including materials like cement, iron, sand, and labor contractor payments for constructing and repairing production floors. According to Section 17(5) of the CGST Act, ITC on civil structures is blocked. Clause (c) and (d) of Section 17(5) restrict ITC for works contract services and goods or services used in constructing immovable property. Therefore, ITC on building work is not available. 2. Admissibility of ITC on Electrical Work: The applicant requested ITC on electrical installations such as sub-station work, DG set power supply systems, lighting systems, and LAN systems. Electrical installations, once installed, become part of the immovable property and fall under the provisions of Section 17(5)(c) and 17(5)(d). Consequently, ITC on electrical work is not admissible. 3. Admissibility of ITC on Air Condition Work: The applicant sought ITC on air conditioning equipment, piping work, ventilation fans, and air distribution systems. These installations, similar to electrical work, become part of the immovable property upon installation. Therefore, as per Section 17(5)(c) and 17(5)(d), ITC on air conditioning work is not admissible. 4. Admissibility of ITC on Fire Protection Work: The applicant sought ITC on fire protection installations such as internal fire hydrant systems, sprinklers, and extinguishers. These items do not qualify as apparatus, equipment, and machinery fixed to earth by foundation or structural support. Thus, they do not fall under the definition of "Plant & Machinery" as per the Explanation to Section 17 of the CGST Act. Therefore, ITC on fire protection work is not admissible. 5. Admissibility of ITC on Mechanical Work: The applicant requested ITC on plumbing, internal and external sewage systems, sanitary ware, and gardening water supply systems. Plumbing and sewage systems are integral parts of the building or civil structure, and hence, ITC on these is not available. Additionally, ITC on the gardening water supply system is inadmissible as it is not used in the course or furtherance of business, per the restrictions in Section 17(5) of the CGST Act. Ruling: The Input Tax Credit of Tax paid on costs proposed to be incurred in relation to the activities mentioned is not admissible. This ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and is subject to the provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.
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