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TMI Blog2020 (1) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or services or both are used in course or furtherance of business. The applicant is paying GST on goods and services supplied by M/s. Akanksha Contracts Pvt. Ltd. for construction of MRO facility on the applicant's land. The provisions of Section 17(5)(d) of GST Act, 2017 is clear that if the goods or services are used for the construction of an immovable property, the ITC shall not be available irrespective of the use of the said property. The applicant is not eligible to claim credit of the GST charged by vendor for supply of goods and services to it, which are used for carrying out the activities (Civil Work and External Developmental Works) for setting up of MRO facility. - RAJ/AAR/2019-20/23 - - - Dated:- 21-10-2019 - J.P. MEENA AND HEMANT JAIN MEMBER Present for the applicant: Mrs. Disha Jain, Advocate (Authorised Representative) Note: Under Section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of receipt of this order. At the outset, we would like to make it clear that the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility will thereafter be given on lease to Elcom by the Applicant. Elcom will install its equipments in the MRO facility and will render MRO services to Israel Aerospace Industries. The scope of work of Applicant for setting up the MRO facilities would include the following: a. Civil Work (Earth work, concrete work, brick work, steel work, wood work, aluminium/ metal work, waterproofing, flooring/ skirting, finishing) b. External Development Works (Area Grading, site levelling and roads) c. Fire-fighting system(Fire pumps, internal hydrant, sprinkler system, fire extinguishers, external fire hydrant system, electrical works) d. Internal and External Plumbing and sanitary works (Sanitary fixtures and fittings, internal drainage, internal water supply, external sewage, external water supply, pumps, treatment station) e. Heating, ventilation and Air Conditioning ('HVAC') in Hanger Building, warehouse building and paint shop (variable refrigerant flow system, air handling system, air distribution system, piping, insulation, ventilation system and electrical works) f. Electrical installations (11 KV HT Panel, transformers, 11 KV HT cable, bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following activities for setting up of MRO facility which will be rented out: Civil Work Statement containing the applicant's interpretation In the understanding of the Applicant, it is eligible to take credit of GST charged by M/s. Akanksha Contracts Pvt. on goods and services supplied to it for performing the activities of civil work and external development work for setting up of MRO facility. In order to analyze the instant matter, attention is invited to the following relevant provisions: Section 2(59) of the CGST Act provides for the definition of 'inputs' as following: means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Section 2(60) of the CGST Act defines input service as following: means any service used or intended to be used by a supplier in the course or furtherance of business. Section 2(62) of the CGST Act defines input tax as following: in relation to a registered person, mean the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inputs and input services in respect of which credit is not available. Section 17(5)(d) of the CGST Act provides that the credit will not be available with respect of goods or services or both received by taxable person for the 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 extract of relevant portion of Section 17(5) (d) is provided below for quick reference: (d) 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. Explanation . - For the purposes of clauses (c) and (d), the expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; Explanation . - For the purposes of this Chapter and Chapter VI, the expression plant and machinery means apparatus, equipment, and machinery fixed to earth by foundation or structural su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility on lease will be liable to pay tax as the same is a taxable supply of service. In order to substantiate the understanding of the Applicant, reference is made to Circular No. 74/2018 dated 08.12.2018 which provides that credit will be available for construction materials, capital goods and input services used for construction of flats, houses, etc. where completion certificate has not been issued. Thus, it can be concluded that the intent behind incorporating Section 17(5)(d) is to restrict the credit where the immovable property is being supplied after the completion certificate, as supply of immovable property does not attract levy of GST. However, for all other cases, such as renting of immovable property, as supply of service is being undertaken, credit of inputs and input services is available. In the light of aforementioned, it is submitted that where the immovable property is constructed for the purpose of leasing out, the tax chain is not broken and accordingly, credit is available. In the instant case, the Applicant is involved in setting up of MRO facility and further leasing it out to Elcom. Therefore, the Applicant is liable to pay GST on the outwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Further reliance in this regard is required to be made to the ruling of Punjab Authority of Advance Ruling in the matter of In Re: K.P.H. Dream Cricket Private Limited, 2018 (18) G.S.T.L. 278 (A.A.R. - GST) = 2018 (10) TMI 747 - AUTHORITY FOR ADVANCE RULING, PUNJAB , credit of inputs and input services was allowed to the assessee for the act of providing complimentary tickets, as this act was taxable. On the basis of the aforementioned submissions, it is submitted that as the Applicant is engaged in the provision of renting of immovable property which is a taxable supply, the goods and services procured by it for making such supply are eligible for credit. Further reliance in this regard is placed on the case of Oxford University Press vs. Commissioner of Income Tax, (2001) 3 SCC 359 = 2001 (1) TMI 79 - SUPREME COURT , wherein purposeful interpretation of a statutory provision was validated. Furthermore, in the case of K.P. Varghese v. Income-Tax Officer, Ernakulam and another, Vol. 131 (1981) ITR 597 = 1981 (9) TMI 1 - SUPREME COURT , it has been observed that literal construction in certain cases leads to an absurd interpretation of a statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g through the submissions made by the applicant, we find that the applicant has entered into agreement with M/s. Elcom Systems Pvt. Ltd for providing on lease a Maintenance Repair and Overhaul facility (MRO). That, the applicant further engaged M/s. Akanksha Contracts Pvt. Ltd. for supplying various goods and services for setting up the MRO facility on its land. The applicant in the instant case is contending that he is eligible to claim input tax credit in respect of goods and services supplied by M/s. Akanksha Contracts Pvt. for carrying out the activities of Civil Work and External Development Works for setting up of MRO facility which will be further leased to M/s. Elcom Systems Pvt. Ltd. by the applicant. Further nature of work undertaken in the activity of MRO is for supply of goods and services leading to creation of immovable property. The relevant provisions of the act in this regard is reproduced below: Immovable property is defined in Section 3(26) of the General Clauses Act, 1897 as under: Immovable Property shall include land, benefits to arise out of land and things attached to earth, or permanently fastened to anything attached to the earth. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed; (b) he has received the goods or services or both. Thus, Section 16 (1) of the GST Act specifically provides that every registered person shall be entitled to take credit of the input tax charged on any supply of goods or services or both made to him, which are used or intended to be used in the course or furtherance of his business. Such entitlement is subject to fulfillment of certain conditions such as possession of invoice, receipt of goods/ service, payment of tax to Government etc. as provided under Section 16(2) of the GST Act, 2017. However, the availability of credit is subject to the restrictions as prescribed under Section 17(5)(d) of the GST Act, 2017. The relevant portion of sub-section 5 of Section 17 of GST Act, 2017 in this regard is reproduced below: - (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely: (c) 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; (d) go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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