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2023 (5) TMI 126 - AAR - GSTAllowability of Input Tax Credit - construction of shed using pre-fabricated technology - section 17(5)(d) of the CGST/ TGST Act - HELD THAT - As seen from the facts of the case the appellant erects a PFS using prefabricates structures. The overlying structure along with the land on which it erected constitutes the PFS . The PFS is meant for business activity and therefore is associated with the beneficial enjoyment of the land on which it is constructed - Reference may be made to clause 4(v) of the Circular No. 58/1/2002-CX dated 15/01/2002, where it is concluded that if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods. Clearly, the PFS cannot be relocated by unfixing the pre-fabricated structures alone. The dismantling of the floor, which is the most important component of the PFS , is not possible without substantial damage to the foundation. Section 17(5)(d) bars any taxpayer to avail the benefit of Input Tax Credit in case where the goods or services or both received by the said person are used for the construction of an immovable property even if it is in the course or furtherance of business - the contention of the applicant that the very reason why PFS is preferred over conventional building is that it offers movability doesn t make him eligible for availing ITC as per Section 17(5) of the CGST/TGST Act 2017. This is because when a PFS is assembled in a place the intention is definitely not to make it a movable structure but rather to conduct the business permanently beneath it i.e. on the RCC platform to which it is attached. PFS has more flexibility than the conventional structures in facilitating hassle-free shifting based on changing business requirements but that doesn t make it a movable structure as the intention of establishing shed or PFS is to continue business permanently on the RCC platform to which it is attached. The pre-fabricated movable components joined to make a structure do not constitute as separate property of the PFS . They are building blocks applied to a civil structure attached to the land to construct a complete PFS . They have no separate existence from the PFS . The PFS cannot be conceived without the beneficial enjoyment of the civil structure, which is an integral part of the property. On this basis, PFS being constructed is classified as an immovable property and credit is not admissible on inward supplies which include pre-fabricated movable components and also on inward Works contract services pertaining to PFS technology as per section 17(5)(c) and section 17(5)(d) of CGST/TGST Act 2017.
Issues Involved:
1. Whether Input Tax Credit (ITC) is allowed for the construction of a shed using pre-fabricated technology. Summary: Issue 1: Whether Input Tax Credit is allowed for construction of shed using pre-fabricated technology? Applicant's Submissions: - The applicant, M/s. Sanghi Enterprises, constructs sheds on leased land using pre-fabricated technology. - The shed is fixed by anchor bolts to a low RCC platform embedded in the ground, with other components like columns, beams, rafters, wall sheets, and roof shed joined by nuts and bolts. - The shed can be easily dismantled and restructured at another location, reducing capital expenses. - The applicant argues that since the shed can be dismantled without damage, it should not be considered immovable property and relies on the Supreme Court judgments in Solid & Correct Engineering Works and Sirpur Paper Mills Ltd. Authority's Findings: - Under Section 17(5) of the CGST Act, goods or services received for the construction of immovable property are not eligible for ITC. - The applicant's shed, constructed using prefabricated structures, is considered immovable property as it is erected for the beneficial enjoyment of the land. - The Supreme Court's ruling in Sirpur Paper Mills Ltd. is not applicable as it pertains to machinery, not structures like sheds. - The Supreme Court in Solid & Correct Engineering Works held that even temporary structures, if intended for the beneficial enjoyment of the land, are immovable property. - The shed constructed by the applicant is therefore classified as immovable property and ITC is not admissible under Section 17(5)(d) of the CGST Act. Ruling: - Input Tax Credit is not allowed for the construction of the shed using prefabricated technology as the shed is considered immovable property.
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