2024 (6) TMI 109 - AAAR - GST

Admissibility of Input Tax Credit (ITC) - air conditioning and cooling system - ventilation system - HELD THAT - The work order awarded to M/s. Skai Air Control P Ltd. to supply install and commission HVAC works for proposed factory assembly administration staff facility associated works. The work order includes amongst other things even the maintenance and warranty of the air conditioning and cooling system and the ventilation system. Thus the averment raised that the air conditioning and cooling system and ventilation system cannot be treated as one system and that the vendor is supplying various machines and not one standalone system and that the Air conditioning system is nothing but a group of inter-related and interdependent machines performing a desired task; that they do not lose their identity is not a legally tenable argument. The Air Conditioning and cooling system and ventilation system becomes a part of the building once it is installed and thereby an immovable property. As the installation of the air conditioning and cooling system and ventilation system via a works contract service makes it an immovable property it ceases to be a plant and machinery. The appellant is not eligible to avail ITC on supply of air conditioning and cooling system and ventilation system since it ceases to be a plant and machinery and is blocked under Section 17 (5) (c) of CGST Act 2017 as the same is works contract services for construction of an immovable property. Appeal dismissed.

Summary

Issues Involved:
1. Admissibility of Input Tax Credit (ITC) on Air Conditioning and Cooling System.
2. Admissibility of ITC on Ventilation System.

Summary of Judgment:

1. Admissibility of ITC on Air Conditioning and Cooling System:
- Appellant's Query: The appellant sought to know the admissibility of ITC of GST paid on the procurement of plant and machines, including services of installation and commissioning, u/s 16 and 17 of the CGST Act, 2017.
- GAAR's Ruling: The appellant was not eligible for ITC on the Air Conditioning and Cooling System as they are blocked credit u/s 17(5) of the CGST Act, 2017.
- GAAR's Findings: The system, once installed, becomes part of the building and is classified as immovable property. The supply and erection of the system are considered works contract services, which are blocked credits u/s 17(5)(c) of the CGST Act, 2017.
- Appellant's Argument: The appellant argued that the system comprises inter-related and inter-dependent machines that do not lose their identity and should be considered as plant and machinery, thus eligible for ITC.
- Appellate Authority's Decision: The authority upheld GAAR's ruling, stating that the system, once installed, becomes immovable property and ceases to be plant and machinery. The supply of the system falls under works contract services for construction of immovable property, making it ineligible for ITC u/s 17(5)(c) of the CGST Act, 2017.

2. Admissibility of ITC on Ventilation System:
- Appellant's Query: Similar to the Air Conditioning and Cooling System, the appellant sought to know the admissibility of ITC on the Ventilation System.
- GAAR's Ruling: The appellant was not eligible for ITC on the Ventilation System as it is also classified as immovable property and falls under blocked credits u/s 17(5) of the CGST Act, 2017.
- GAAR's Findings: The Ventilation System, once installed, becomes part of the building and is considered immovable property. The supply and erection of the system are classified as works contract services.
- Appellant's Argument: The appellant argued that the Ventilation System is a network of machines and should be considered as plant and machinery, thus eligible for ITC.
- Appellate Authority's Decision: The authority upheld GAAR's ruling, stating that the Ventilation System, once installed, becomes immovable property and ceases to be plant and machinery. The supply of the system falls under works contract services for construction of immovable property, making it ineligible for ITC u/s 17(5)(c) of the CGST Act, 2017.

Conclusion:
The Appellate Authority confirmed the GAAR's order and rejected the appeal, holding that the appellant is not eligible to avail ITC on the supply of Air Conditioning and Cooling System and Ventilation System since they are classified as works contract services for construction of immovable property and are blocked u/s 17(5)(c) of the CGST Act, 2017.