Central AC Plant, Lift, Electrical Fittings, etc., were categorized as immovable property, ineligible for GST ITC

[CA Bimal Jain]

The AAAR, Gujarat in the case of IN RE: M/S. THE VARACHHA CO-OP. BANK LTD., - 2023 (10) TMI 473 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT observed that items like the Central Air Conditioning Plant, Lift, Electrical Fittings, and Fire Safety Extinguishers were categorized as immovable property, thereby making them ineligible for Input Tax Credit (“ITC”).

Facts:

M/s. The Varachha Co-Op. Bank Ltd., (“the Applicant”), has asserted that they are currently in the process of constructing a new administrative building, incurring expenses on various services. They claim eligibility for ITC and have specifically entered into a contract for the 'supply and erection' of a 'Central Air Conditioning System.'

The definition of 'Works Contract' under Section 2(119) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is brought into consideration by the Applicant. This term is delineated to contracts associated with immovable property, as defined in clause 3(26) of the General Clauses Act, 1897. Furthermore, Section 3 of the Transfer of Property Act, 1882 defines the crucial aspect of being 'attached to earth.' The appellant argues that items like a lift, assembled and erected on the premises, cannot be deemed immovable property, especially since it is saleable and can be dismantled for resale.

In their construction project, the Applicant plans to install 'Electrical Fittings' both externally and internally. They explicitly state their intention not to avail ITC on Electrical Fittings used in civil construction due to the specific blocking provision in Section 17(5) of the CGST Act. However, they contend that for other 'Electrical Fittings,' where no specific barring provisions exist, ITC should be applicable.

Additionally, the Applicant addresses the classification of Fire Safety Extinguishers as 'Plant and Machinery' attached to the earth, which they argue is both movable and marketable. They assert that the restrictions outlined in Section 17(5)(c) & (d) of the CGST Act should not apply to the procurement of various inputs installed in their administrative building, advocating for the availability of ITC on these goods.

Issue:

Whether the Applicant is entitled to ITC for construction-related services and goods, like the 'Central Air Conditioning System,' 'Electrical Fittings,' and 'Fire Safety Extinguishers,' in their new administrative building depends on the relevant legal definitions and restrictions under Section 17(5) of the CGST Act?

Held:

The AAAR, Gujarat in IN RE: M/S. THE VARACHHA CO-OP. BANK LTD., - 2023 (10) TMI 473 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT, held as under:

• Held that, items like the Central Air Conditioning Plant, Lift, Electrical Fittings, and Fire Safety Extinguishers were categorised as immovable property, thereby making them ineligible for ITC.

Relevant Provision:

Section 17 of the CGST Act:

“Apportionment of credit and blocked credits;

(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18, the input tax credit shall not be available in respect of the following, namely-

(a)………………

(aa)……………

(ab)…………..

(b)…………….

(c) works contract services when supplied for the construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;”

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