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TMI Blog2019 (6) TMI 1580X X X X Extracts X X X X X X X X Extracts X X X X ..... ractors for fitting-out of the warehousing spaces and provides the subject space having with all facilities and infrastructure facility on rent to various industrial consumers and manufacturers. The Applicant discharges applicable GST on such procurements. 1.6 Section16 (1) of Central Goods and Services Tax Act, 2017 ("CGST Act") entitles a registered person to take credit of input tax charged on any supply of goods or services or both which are used or intended to be used in the course or furtherance of business. 1.7 However, as per Section 17 (5) of the CGST Act, a restriction is imposed with respect to input tax credit (hereinafter referred to as "ITC") on procurement of goods and services or both received by the taxable person for construction of an immovable property. However, the term 'construction' is limited to supplies to the extent capitalized to an immovable property. 1.8 One of the types of procurements made is that of the pre-engineered structure ("PES"). 1.9 As can be seen in the above images, a PES is a enclosure system that always includes a structural system and often includes roof and wall cladding. 1.10 The pre-engineered metal system is advantageous because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... progress of process of". 3.6 The meaning of "Furtherance" as per Black's law dictionary:6th edition 11th reprint 1997, is "act of furthering, helping forward, promotion, advancement or progress". 3.7 Furtherance of business will, thus mean, act of furthering business, helping forward business, promotion of business, advancement of business or progress of business. 3.8 As mentioned above, the Applicant is into the business of building and managing industrial warehousing spaces for consumers and industrial centres and PESs 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 civil works helps the Applicant in carrying out their business in their day to day operations. 3.9 Therefore, basis the above submissions, given that the Applicant procures PES works which are erected in warehousing spaces rented out by the Applicant, the condition as provided under Section 16 for availment of ITC stands satisfied. II. Restriction provided under Section 17(5) (c) & (d) does not apply to procurement of items for PESs: Credit restriction is only in so far as inputs/ input services "for constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery'. 3.18 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. 3.19 Thus, PESs are not covered under the definition of 'construction' and consequently is not restricted under Section 17(5). 4. PESs qualify as eligible credit under Section 16 of the CGST Act, Restriction provided under Section 17(5)(d) does not apply: 4.1 Basis the above submissions regarding the admissibility of the credit for works relating to PESs, the Applicant wishes to reiterate the analysis above as they same shall be applicable in the case of PESs as well. 4.2 The Applicant submits that as per Section 16 of the CGST Act, he is eligible to avail credit on such PESs as the same are used in the course or furtherance of Applicant's business. 4.3 It is pertinent to note that the restriction prescribed in Section17 (5) pertains to as inputs/ input services "for construction of an immovable property". 5. Goods in question are movable: 5.1 The Applicant submits that anything embedded to the earth and which cannot be dismantled and moved, strictly are covered under the ambit of "i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, PES foundation slab merely rests on the ground and are not imbedded in the earth. Therefore they cannot be classified as "immovable property" as described above. 7.2 Pre-engineered structures are different from that of conventional concrete buildings. They are often preferred as they are more efficient and effective as compared to concrete structures. Analysis of same has been brought out below:- Feature Pre-Engineered Steel Structures (PES) Concrete Building (RCC) Capacity Steel may carry up to 6 times its own weight. The carried load of concrete is almost equal to its weight Erection Easy, fast and efficient. Erection costs and time are accurately forecast based on extensive experience with similar buildings. Concrete construction takes more time to complete because it must be poured on site and allowed to cure before proceeding. Clear Spans Larger, up to 90 meters without interior columns. Smaller and the larger the span the heavier the structure. Building Height Higher Shorter It is nearly impossible to modify a concrete building to meet changing future needs. To expand the structure, the contractor must build a new structure with foundations, columns an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness requirements efficiently and effectively and hence it is in the course or in the furtherance of business. 8. Inapplicability of the decision of the West Bengal Authority for Advance Ruling in the case of Tewari Warehousing: 8.1 In the Advance Ruling issued by the authority for Advance Ruling, West Bengal, in the case of M/s. Tewari Warehousing Co Private Limited, the question was whether the applicant is eligible for input tax credit pertaining to construction of warehouse using pre-fabricated technology. 8.2 The Authority reasoned that if the article cannot be used without fastening or attaching it to the earth and is not removed under ordinary circumstances, it may be considered permanently fastened to anything attached to the earth. 8.3 Furthermore, in the context of the GST Act, if the article attached to the earth is not agreed to be severed before supply or under a contract for supply, it ceases to be goods and, for that matter, a moveable property. 8.4 The Authority opined that the pre-fabricated movable structures do not constitute the property of the warehouse. They are building blocks applied to a civil structure attached to the land to construct a complete w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erection of infrastructure, which consists of "steel tabular pole, galvanized iron wire, nuts &, bolts, optical fibre cables, plastic pipes, clamps", for telecommunication service providers since the infrastructure provided by the applicant is different from "Telecommunication Tower". 9.2 It was held that the infrastructure provided by the applicant is different from "Telecommunication Tower" and it is not an immovable property as it can be easily be moved to another place for use without any damage to the entire infrastructure. The infrastructure being a movable property can be classified as 'goods' in terms of section 2(52) of CGST/SGST Act, 2017. The infrastructure provided being different from Telecommunication Tower, the applicant can avail Input Tax Credit on GST paid on the goods & services in terms of section 16(1) of CGST/SGST Act, 2017, consumed while providing the supply in question. 9.3 As mentioned in the facts of the case, PES are movable in nature and thus applying the decision of the Advance Ruling Authority, the Applicant would be rightly eligible for Input Tax credit. 9.4 In view of the above, on applying three test referred above, PES cannot be termed as immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of furtherance is business and as per section 16 of the GST Act "Every registered person subject to such conditions and restrictions as may be prescribed would be entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in course or furtherance of business". 9.11 Further it is understood that credit with respect to various plant and machinery is admissible as per Section 16 of the CGST Act. 9.12 From the above, it can be inferred that the credit of input tax charged on the supply in the nature of various plant and machinery items are to be allowed as it is admissible under CGST/SGST Act 2017. 9.13 Thus, the Applicant submits that with reference to the explanation provided in section 17 (5) (d) of CGST Act, the goods in question i.e., PES which are in the nature of supporting civil works are movable fit-outs which would qualify as eligible input tax credit. 10. Discussion: 10.1 The applicant is engaged in building and managing industrial and warehousing spacing for consumers and industrial Centre. It procure goods and services from various contractor for fitting out the warehousing spaces and provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth". Whereas, Section 3(36) defines movable property as "property of every description, except immovable property". So as per this definition, any property which does not qualify to be immovable property, is a movable property. This definition of immovable property under the General Clauses Act is affirmative in nature as against the definition contained in the Transfer of the property Act 1882, which is negative in nature. As per TPA, immovable property does not include standing timber, growing crops or grass. It further says that "attached to the earth" means: (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. 10.7 Now, 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. 10.8 As p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oundation especially in case of area of considerable dimension as in case of a warehouse, the top soil has to be removed, surface has to be leveled and some part of foundation stone always rests with in the earth. So this contention of the applicant that the support base of the warehouse made of PES neither attached to nor imbedded in the earth is rejected. 10.12 As regards the issue of the non-permanent nature of the PES structure is concerned, it has already been discussed that the degree and nature of annexation is vital to the decision whether a property is a movable property or an immovable property. In the case of applicant, the warehouses are rented out to industrial consumers and manufacturers. These warehouses cover considerably large area and caters to the need of business which in terms requires permanence and stability. So, it cannot be said that the warehouses constructed/ erected by way of fixing pre-engineered structures is non-permanent in nature. 11. Ruling: 11.1 In light of the above discussion it is concluded that the warehouses constructed/ erected by the applicant are an immovable property for the purposes of GST Law and the applicant is not eligible to ITC ..... 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