2022 (5) TMI 1134 - AAAR - GST

Input Tax Credit - Plant and Machinery or not - whether LNG jetties proposed to be built by the applicant can be said to be covered within expression plant and machinery as foundation to equipment, apparatus, machinery to be installed on it? - input tax credit of GST paid on inputs, input services as well as capital goods procured for the purpose of building the LNG jetties - Section 16 read with Section 17 of CGST Act - HELD THAT - As per Explanation provided under Section 17 of the CGST Act, 2017 plant and machinery means apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both. Here the section 17 of CGST Act, 2017 provides for allowing input tax credit in respect of goods or services both received by a taxable person for construction of plant and machinery fixed to earth by foundation or structural supports that are used for making outward supply of goods or services or both. The input tax credit on construction of foundation is allowed if the same is used for fixing on it the plant and machinery and further the said plant and machinery should be used for making outward supply of goods or services or both. The foundation or structural support needs to be exclusively for fixing the plant and machinery on it. Allowing input tax credit on construction of foundation cannot be decided in isolation without deciding as to whether items to be fixed on it falls within the definition of plant and machinery and further the same would be used for making outward supply of goods or services or both. The appellant is not before us seeking ruling on allowing input tax credit on any plant and machinery including its foundation that will be used for making outward supply of goods or services or both - LNG Jetties are nothing but civil structures and civil structures are excluded from the definition of foundation and structural supports. The foundation that is allowed in the definition of plant and machinery is that which fixes the plant and machinery to the earth making it immovable. If certain portion of LNG jetties is used for directly fixing plant and machineries then it will not make jetties foundation for plant and machineries but they are only in the nature of civil structures. The appellant has also not produced any evidence to substantiate their claim that LNG jetties which according to them are foundation of plant and machineries will be used for outward supply of goods or services or both. The LNG Jetties being built by the appellant are not in the nature of plant and machinery being foundation for equipment, apparatus, machinery for re-gasification to be installed thereon. Therefore input tax credit on inputs, input services and capital goods for the purpose of building these LNG Jetties are not admissible.

Summary

Issues Involved:
1. Whether LNG jetties qualify as "plant and machinery" under Section 17 of the CGST Act, 2017.
2. Eligibility for input tax credit (ITC) on GST paid for inputs, input services, and capital goods used in constructing LNG jetties.

Issue-wise Analysis:

1. Whether LNG jetties qualify as "plant and machinery" under Section 17 of the CGST Act, 2017:

The appellant, M/s. Swan LNG Pvt. Ltd., entered into a Concession Agreement for the development of an LNG Port with a Floating Storage and Regasification Unit (FSRU) facility. They sought clarity on whether LNG jetties could be considered as "plant and machinery" under Section 17 of the CGST Act, 2017, which would allow them to claim ITC.

The Gujarat Authority for Advance Ruling (GAAR) concluded that LNG jetties are civil structures and do not qualify as "plant and machinery." GAAR's findings included:
- LNG jetties are immovable properties constructed on pillars or plinths extending from the seashore to the deep sea.
- Foundations are structures located below the ground supporting buildings above, whereas jetties are high above the seashore and extend into the deep sea.
- The definition of "plant and machinery" excludes land, buildings, and any other civil structures. Therefore, LNG jetties do not meet the criteria for "plant and machinery."

The appellant argued that the jetties serve as foundations for plant and machinery necessary for regasification. However, GAAR held that the apparatus, equipment, and machinery are not fixed to the earth by foundation or structural support and are instead fixed to the jetties, which are civil structures.

2. Eligibility for ITC on GST paid for inputs, input services, and capital goods used in constructing LNG jetties:

The appellant claimed that ITC should be available for GST paid on inputs, input services, and capital goods used in constructing LNG jetties, as these jetties are foundational for plant and machinery.

GAAR's ruling stated:
- Section 17(5)(c) and (d) of the CGST Act, 2017, restricts ITC on works contract services and goods or services received for constructing immovable property, other than plant and machinery.
- The definition of "plant and machinery" includes apparatus, equipment, and machinery fixed to the earth by foundation or structural support, but excludes civil structures.
- The jetties are civil structures and, therefore, do not qualify for ITC under the CGST Act, 2017.

The appellant's appeal reiterated that LNG jetties should be considered as foundations for plant and machinery, citing various contracts and certifications. However, the appellate authority upheld GAAR's ruling, stating that:
- The jetties are civil structures excluded from the definition of "plant and machinery."
- The foundation of plant and machinery must be exclusively for fixing plant and machinery to the earth and used for making outward supply of goods or services.
- The appellant did not provide sufficient evidence to substantiate their claim that LNG jetties are foundational for plant and machinery used for outward supply.

Conclusion:

The appeal was rejected, and the Advance Ruling No. GUJ/GAAR/R/46/2020 was confirmed. The LNG jetties being built by the appellant are not considered "plant and machinery" under Section 17 of the CGST Act, 2017. Consequently, the appellant cannot avail ITC on GST paid for inputs, input services, and capital goods used in constructing the LNG jetties.