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TMI Blog2019 (10) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... g works are in the nature of works contract services and argued that they qualify as eligible credit under section 16 of the CGST Act. 2017. Section 17(5)(c) clearly states that no input tax credit would be available on the tax paid on Works contract services when supplied for construction of an immovable -property (other than plant and machinery) except where it is an input service for further supply of works contract services. It is clear that the items are fixed to the earth by foundation or structural support and are intended to be used for making an outward supply of provision of rental services and hence are covered under the definition subject to the exclusions - It is pertinent to note that the items do not have independent existence and are part and parcel of the entire building, a building with infrastructure. It is also seen from the intend of the applicant what is given on rental is the Space with all infrastructure and once these immovable properties come into existence, they get merged into the Common building space with modern infrastructure and facilities and hence are excluded from the definition of plant and machinery as applicable to section 17(5) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re are certain items in the nature of plant and machinery, listed below and the same are explained in detail in the subsequent paras: A) Electrical Works B) Pumps, pumping systems and tanks C) Lighting System D) Physical Security system E) Fire System A. Electrical works: This includes installation of equipment and devices which controls or uses electrical power. These devices control hardware through which power streams. Business operations involve efficient ways of investment in infrastructure. This also involves knowing how and Where to use electrical works to make better engineering and investment decisions. For any organization electrical works are mission critical. A power failure or a problem to any of the above mentioned systems can mean an expensive disruption to operations. Therefore these Systems are absolutely essential for functioning of business. Ring main unit - This is used in a power distribution system as a switch gear devi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al occurrences such as droughts. They provide water for drinking, firefighting, gardening, for other legal requirements, for upkeep and maintenance, etc. They also provide emergency Storage for fire protection C. Lighting systems Street light poles and high mast - This is tall pole with lighting attached to the top pointing towards the ground required for lighting over a large area. It consists light sensitive sensors that activate the flow of electricity in the poles when the light around is too low. Electricity is sent through high-intensity discharge lamps. Street lights and masts are essential to provide security and increasing the quality of life by artificially extending the hours in which activity can take place and improving. They also ensure a standard of lighting sufficient to reveal necessary amenity and visual information at night, including the road line-marking, property lines, signage, road furniture, road surface imperfections etc. LED Internal light fittings - These include light fixtures that use LED feature. LED technology has rapidly developed to be one-of the leading and prominent lighting solutions today. These also serve a lot of pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide. Shutters also give you huge amount of control over the amount of light that enters the room. We can choose to Completely darken the room by lowering the shutters fully or Can have them open so that sunlight floods the room. They also give you control over airflow. Let in the fresh air or keep an obnoxious smell out thus providing clean and workable environment. They also make for safe storage of the goods stored in a warehouse. Portable security cabins - These are designed and built to be transportable building rather than permanently located. Portable cabins can be for temporary usage to be taken away later. Reasons why portable security cabins are required: As the name suggests, security cabins are of utmost importance to maintain order, improve safety and provide security in a workplace. They are required to provide safe surrounding for security personnel. These cabins are adaptable, transferable, simple to build, destroy and again built and truly convenient Portable Security cabins are great degree lightweight and since they are lightweight, they can be taken anyplace. Metal doors and Rolling Shutters - Doors are used in a buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t anywhere in a commercial building and best of all the fire safety measure is highly cost effective for Smoke and fire protection. This early warning signal is extremely important to life safety for the following reasons: Providing occupants of building prompt Warning if a fire occurs; Increases evacuation time for building occupants before a fire spreads out of control; Emergency medical help can be immediately sent out to those in need; and Fire department personnel can help people exit the building safely. Fire rated doors - These are doors with fire resistance rating used as a part of passive fire protection system to reduce the spread of fire and smoke. They are highly important to protect life and property in case of fire emergencies. Fire doors are part of a building s passive fire protection system, an essential requirement for public buildings, offices and factories. They separate compartments of a structure and enable safe evacuation so as to: Keep any fire in the compartment in which it starts; Protect the occupants (and contents) of other compartments; and Provide a safe, protected route to allow the occupants to escape. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial warehousing spaces for consumers and industrial centers and all the subject electrical works, pumps, pumping systems and tanks, lighting system, physical security system and fire system helps in giving value add to its Industrial customers and managing the Industrial spaces in more efficient and effective way. In other words, the subject plant and machinery items help the Applicant in carrying out their business in their day to day operations. 4.9 Therefore; basis the above submissions; given that the Applicant procures various inputs which are installed in warehousing spaces. rented out by the Applicant, the condition as provided under Section 16 for availment of ITC stands satisfied. 5. The applicant Claims that the restriction provided under Section 17(5) (c) (d) does not apply to procurement of items listed above for the following reasons: Credit restriction is only in so far as inputs/ input services for construction of an immovable property 5.1 Section 17(5) (c) (d) uses the word for construction. 5.2 The term for is more Specific than in relation to . The word for generally means for the purpose of . 5.3 The word for is defined in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include re-construction, renovation, additions or alterations or repairs, to the extent of capitalization of the said immovable property. 5.10 The Applicant in this regard submits that, so far the business activity of the applicant is concerned, the items listed in Appendix I are not capitalised as immovable property but are in fact recorded as plant and machinery . 5.11 They can be detached and re-used and are not considered to be the permanent civil assets. It is for this very reason that these items are not capitalized as immovable property, 6. The applicant submits that the items in respect of this advance ruling qualify as eligible Credit under Section 16 of the CGST Act and the restriction provided under Section 17(5)(d) does not apply for the following reasons: 6.1 Basis the above submissions regarding the admissibility of the credit for Various electrical works, pumps; pumping system and tanks, lighting System, physical security system and fire system, the Applicant wishes to reiterate the analysis above as they same shall be applicable the specified items as well. 6.2 The Applicant submits that the as per Section 16 of the CGST Act, he is eligible to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are immovable in nature and classified as Plant and machinery. Hence these are specifically excluded from Section 17 (5)(c) (d) Receptacle system plug socket Electrical works Plant and Machinery Movable Pumps Electrical works Plant and Machinery Movable Street light poles, High mast Electrical works Plant and Machinery Movable Pump room and accessories Fire system Plant and Machinery Movable Fire Alarm system Fire system Plant and Machinery Movable Fire Protection Systems Fire System Plant and Machinery Movable LED Internal light fittings Lighting System Lights Fixtures Movable Section 17(5) covers works Contract services an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supply in question. As mentioned in the facts of the cases the listed items are movable in nature and thus applying the decision of the Advance Ruling Authority, the Applicant would be rightly eligible for Input Tax credit. In view of the above, von applying three test referred above, the wooden floorings and glass partitions cannot be termed as immovable property for the following reasons: They are not immovable property; They cannot be said to be attached to earth; The setting up itself is not intended to be permanent at a given place. It can be moved based on business requirements. 9.2 The Applicant further places reliance on the advance ruling issued by the Authority of the advance ruling in the, case of M/s. BAHL Paper Mills Ltd = 2018 (6) TMI 431 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND , where the question was whether Credit will be available on office fixtures furniture, AC, plant sanitary fittings on the newly constructed building on its own account, for furtherance of business, and is capitalized in books of accounts. It was held that as per the explanation to Section 17 of the CGST Act, availment of credit was not admissible i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pumping system and tanks, lighting system, physical security system and Fire System which are in the nature of Plant and machinery Which would qualify as eligible input tax credit. 11. FINDINGS DISCUSSION: We have considered the submissions made by the applicant in their application for advance ruling as well as the additional submissions made by Sri. Harish Bindumadhavan, Advocate, during the personal hearing. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 11.1 It is evident that the applicant is engaged in the building and managing industrial warehouse spaces for consumers and industrial centres. The applicant is proposing to construct a new Industrial warehouse at Bagus Village in Karnataka and the amenities provided include truck parking, canteens, rest areas, dormitories, business centres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises. 11.5 It is pertinent to note that Section 17(5) overrides section 16(1) and any input tax credit shall not be available in respect of- (i) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; and (ii) goods or 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. The term construction includes re-construction, renovation, additions or alternations or repairs to the extent of capitalization to the said immovable property, 11.6 The term construction includes additions to the immovable property to the extent of capitalization. Nowhere is it said that the capitalized amount needs to be declared as in the books of accounts within the value of immovable property i.e. buildings. The Accounting Standards which enumerate the classes of Fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and capital expenses. If the expenses are in the nature of capital expenses and are related to the fixed assets; then they are capitalized. The definition of construction only States that it includes re-construction, renovation, additions, alterations or repairs to the said immovable property and it is only an inclusive definition and hence construction of an immovable property must be seen in that Context. Further, merely accounting of an immovable property as a movable property in the books of accounts of the applicant does not divest the exact nature of the item and when what is procured is an immovable property, it remains a immovable property, no matter how the same is accounted. 11.11 Further, the applicant argues what is procured are goods as they can be moved. It is clear that the input is a Works contract service as admitted by the applicant himself and is a composite supply involving both goods and services With the outcome being an immovable property and hence this is not applicable. 11.12 The only argument that needs to be examined is whether these are covered under plant and machinery as envisaged in Section 17(5) of the CGST Act. 11.13 The Explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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