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TMI Blog2025 (1) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... t however, if the construction of a building by the recipient of service is for his own use, the chain will break, and ITC would not be available. The appellant has not denied the fact that construction activity has not been done on the leasehold land acquired from GACL. Though the averment is that the chartered engineers certificate states that 99.85% of the land would be utilized for construction of plant and machinery; that plant building will be constructed on a part of leaseholding premises and the unconstructed area will be used for auxiliary services. Conclusion - The GST paid on the surrender of leasehold rights is ineligible for ITC. Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose to construct building/civil structure/administrative block; * that the argument for proportionate credit fails as it cannot be taken as basis for awarding proportionate credit; that the act does not envisage mechanism to award proportionate credit for GST in such cases: * that the GST council in its 37th meeting mentions that the high rate of GST makes new project unviable since credit of GST on leasing is no available for construction of immovable properties. 6. The GAAR, vide the impugned ruling dated 18.10.2021, held as follows: RULING GST amount borne by GNAL on subject service received is blocked credit vide Section 17 (5) (d) CGST Act and thereby ineligible for availment, for the reasons summarised at para 19. 7. Aggrieved by the aforesaid advance ruling, the appellant is before us, raising the following contentions, viz * goods manufactured by the appellant will be supplied to customers & is taxable under GST; * appellant paid consideration to GACL for 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation or to do an act'; that the tax invoice issued is under HSN 999792; * ITC of GST chargeable on relinquishment of righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * that there is no break in the supply chain of the appellant and GACL; * that GAAR failed to distinguish the difference between the right on land and the right attached to land meaning 'profit a prendre'; * that the license to occupy land is the supply of service which covers all commercial transactions; that the license to occupy is a benefit arising out of land & not supply of land itself; that any lease of a licence to occupy land is defined as service; * that not allowing ITC will burden the end consumer & shall lead to double taxation; * that the leasehold right premium amount has been paid to occupying the right over land & engage in manufacturing; * that in their view 'on his own account' means the immovable property is constructed for self-occupied use or non-commercial purposes; that license to occupy land must be dealt on profit of pendre; that the leasehold plot has been used for furtherance of business and not on its own personal account such as self-occupied or a non-commercial object; * that after acquiring leasehold right construction of immovable property has taken place in which manufacturing plant is erected which produces taxable goods & GST is cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. Section 17. Appointment of credit and blocked credits. (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) 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 Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable property consisting of a "plant or machinery". The second exception is where goods and services or both are received by a taxable person for the construction of an immovable property made not on his own account. Construction is said to be on a taxable person's "own account" when (i) it is made for his personal use and not for service or (ii) it is to be used by the person constructing as a setting in which business is carried out. However, construction cannot said to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. 33. Section 17(5) incorporates an explanation which provides that the word "construction" used in clauses (c) and (d) includes reconstruction, renovation, additions, alterations or repairs, to the extent of capitalisation, to the immovable property. Thus, a very wide meaning has been assigned to the expression "construction" by the said explanation. 34. There is hardly a similarity between clauses (c) and (d) of Section 17(5) except for the fact that both clauses apply as an exception to sub-section (1) of Section 16. Perhaps the only other similarity is that both apply to the construction of an immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Supreme Court further, explains that construction is said to be on a taxable person's "own account" when (i) it is made for his personal use and not for service or (ii) it is to be used by the person constructing as a setting in which business is carried out, further stating that construction cannot be said to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. 13. The Hon'ble Supreme Court, in the case of M/s. Safari Retreats P Ltd, ibid, while further analyzing has held as follows viz 43…………. As the expression "plant or machinery" appears to be intentionally incorporated, it is not possible to accept the contention of the learned ASG that the word "or" in clause (d) should be read as "and". If the said contention is accepted, there will not be any difference between the expressions "plant and machinery" and "plant or machinery". This will defeat the legislative intent. 46. The expression "plant or machinery" has a different connotation. It can be either a plant or machinery. Section 17 (5) (d) deals with the construction of an immovable property. The very fact that the expression "immovable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery, held that there could be a plant that is an immovable property; that the word 'plant' not having been defined under the Act, its ordinary meaning in commercial terms will have to be attached to it. The Hon'ble Court, thereafter laid down a functionality test, further concluding that if a building qualifies to be a plant, ITC can be availed against the supply of services in the form of renting or leasing the building or premises, provided the other terms and conditions of the CGST Act and Rules framed thereunder are fulfilled; that however, if the construction of a building by the recipient of service is for his own use, the chain will break, and ITC would not be available. 15. We find that the appellant has not denied the fact that construction activity has not been done on the leasehold land acquired from GACL. Though the averment is that the chartered engineers certificate states that 99.85% of the land would be utilized for construction of plant and machinery; that plant building will be constructed on a part of leaseholding premises and the unconstructed area will be used for auxiliary services. The aforementioned judgement lays down the law as far as section 17 (5) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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