TMI Blog2020 (8) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus the pervasive domain of goods/services provided for under Sec. 16(1) was abridged by Sec 17(5)by specifying the situations wherein input tax credit in respect of certain goods/services has been restricted. It is not under dispute that the lease premium charges , annual lease rentals and maintenance charges are paid by the applicant to the lessor towards lease of land. It is manifest from the terms and conditions of the lease agreement dated 17.08.2017 that the applicant acquired land from M/s IKP Knowledge Park on lease for the purpose of construction of a building where their own laboratory would be accommodated. This is self evident from clause 5 of the agreement. It has been reported by the applicant that the lessor has paid GST on lease premium charges at the rate of 18% treating them as services. The applicant will also be required to pay GST on the annual lease charges and maintenance charges which are in the nature of services. All the referred services are received by applicant for construction of immovable property (other than plant machinery) on their own account. The exclusion clause 17(5)(d) shows that the exclusion is applicable including when s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case: The facts, in brief, that were reported by the applicant in their application are as follows: a. M/s. Daicel Chiral Technologies (India) Private Limited(hereinafter referred to As Applicant or Company ), Turkapally, Medchal Malkajgiri Dist, Hyderabad is a subsidiary of Daicel Chemical Industries Ltd, Japan. b. The company is engaged in providing Pharmaceutical Research Development services. These services involve preparative separation and analysis of pharmaceutical compounds which are commonly referred to as chromatography services . They classified chromatography services under the head technical Testing and Analysis Services (SAC No. 998346) which are liable to GST @18%. The Company is registered under the GST Act vide registration No. 36AACCD8423B1Z1(Registration Certificate enclosed as Exhibit 1). c. In order to render such services, the applicant requires a lab where such separation and analysis services can be performed. Currently, the applicant is rendering such chromatography services from their premises located at Lab 4A, Phase-II, IKP knowledge Park, Genome Valley, Turkapally Village, Shamirpet Madal, Medchal-Malkajgiri dist, H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es supplied to him should be used in the course or furtherance of his business. 2) Their unit is registered under the GST Act having a valid GSTIN as 36AACCD8423B1Z1. They have availed credit of CGST and SGST on supply of leasing services to them by the Lessor for the land acquired on lease. The land so acquired on lease will be used by them in rendering the Chromatography services from the lab to be constructed on the land. Thus, they are a registered person and have taken input tax on services which are used in the course of his business. Therefore, they are eligible to avail the credit of CGST and SGST paid on lease charges to the lessor. 3) The input service has been defined in section 2(16) the CGST Act, 2017 and SGST Act, 2017 as follows: input service means any service used or intended to be used by a supplier in the course or furtherance of his business. The definition of input service is inclusive and not exhaustive. The statute has enlarged the scope of input services by the usage of the word any service . The definition does not provide for only specific activity relating to supply. Thus, all input services used in activities in relation to or for furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act and SGST Act lays down the pre-conditions to avail input tax credit. The conditions prescribed under Sec 16(2) of the Act are as follows: a) Possession of Tax Invoice: They are in possession of tax invoice issued by the lessor. b) Receipt of Services: They entered into a lease agreement for 33 years with the lessor vide Lease Agreement dated 17th August 2017. Accordingly, the effective date of commencement of lease is 17th August, 2017. They have the legal right over the land and are in possession of land with effect from 17th August 2017 and as such they are in receipt of services. c) Payment of tax: They have already paid tax to the lessor and the payment of tax by the lessor to the Government is evident from the copy of GSTR-2A returns. The screenshot of the GSTR 2A return available online was enclosed as Exhibit 4. d) Furnishing of return: They have filed the prescribed monthly return within due date in form GSTR-3B returns for the respective months. The copy of GSTR 3B return filed was enclosed as Exhibit 5. Thus, they have complied with the conditions to avail the credit and therefore they are eligible to avail input tax credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; (e) goods or services or both on which tax has been paid under section 10; (f) goods or services or both received by a non-resident taxable person except on goods imported by him; (g) goods or services or both used for personal consumption; (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and (i) any tax paid in accordance with the provisions of sections 74, 129 and130. 8) GST paid by them on the lease charges doesn t get covered in the ineligible list of input services as reproduced above. Moreover, the Hon'ble Supreme Court in Bajaj Tempo Ltd. Mumbai v. CIT (1992) = 1992 (4) TMI 4 - SUPREME COURT (copy enclosed as Exhibit 6) observed that while interpreting the statute, provision granting incentives for promoting economic growth and development should be liberally construed. Restriction placed on it by way of exception should be construed in a reasonable and purposive manner so as to advance the objective of the provision. Therefore, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on leasing of land service and fulfilment of all the conditions to avail credit, they are eligible to avail credit of CGST and SGST paid to lessor on acquiring land on lease for business activities. 7. Personal Hearing: A personal hearing was held on 20-12-2019 at 03.00 P.M. Sri Srikanth Balakrishnanan (F.C.A), Authorized Representative along with Sri K. Sivaraman(ACA), Authorized Representative of M/s. Daicel Chiral Technologies (India) Private Limited appeared for the personal hearing. They reiterated the facts mentioned above and sought for clarifications in respect of the queries raised in their application. 8. Discussion Findings: 8.1 We have considered the submissions made by the applicant in their application for advance ruling as well as at the time of personal hearing. The applicant vide their application sought for clarification as to whether they are eligible to avail input tax credit of GST charged on (i) Lease Premium Charges; (ii) Annual Lease Rentals (iii) Maintenance Charges paid to lessor towards land lease. To resolve the same, provisions relating to input tax credit as laid down under CGST Act, 2017 need to be perused. 8.2 Sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase on hand, it is not under dispute that the lease premium charges , annual lease rentals and maintenance charges are paid by the applicant to the lessor towards lease of land. It is manifest from the terms and conditions of the lease agreement dated 17.08.2017 that the applicant acquired land from M/s IKP Knowledge Park on lease for the purpose of construction of a building where their own laboratory would be accommodated. This is self evident from clause 5 of the agreement. It has been reported by the applicant that the lessor has paid GST on lease premium charges at the rate of 18% (9% CGST + 9% SGST) treating them as services. The applicant will also be required to pay GST on the annual lease charges and maintenance charges which are in the nature of services. 8.6. We opine and it is also not disputed that the building constructed by the applicant unquestionably falls within the ambit of immovable property in terms of the definition of the immovable property mentioned supra. Further, as per the agreement, the building after completion of construction would be utilised by the applicant for their own utility to accommodate a laboratory which carries out chrom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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