TMI Blog2019 (10) TMI 1391X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Section 16 entitles a registered person to claim credit of input tax charged on any supply of goods or services to him whereas Section 17 is an overriding provision to Section 16. Section 17(5)(d) clearly spells out that the Input tax credit shall not be available in respect of goods and 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. Further, as per the explanation to Section 17(5)(d), plant and machinery excludes land, building or any other civil structures - The dictionary meaning of the term 'on his own account' means 'for one's own purpose or for oneself' or unaided . In this case, the applicant is engaged in the business of providing logistic services including the warehouses. The warehouses are constructed for the applicant's own business purpose i.e. letting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponsible for the upkeep and maintenance of the generator (including the fuel) so that no hindrance is caused to Lessee for the use of the premises. c) That the premises inclusive of service lift and other electrical equipment shall be maintained by the Applicant at its own cost, in good condition including cleaning and housekeeping. That for the purpose of maintenance and use, the Applicant shall deploy sufficient number of manpower at the premises all times so that no hindrance is caused to Lessee while using the premises. d) That the Applicant shall provide to the Lessee the loading and unloading ramps for the vehicles as per standards of Lessee. For storage of two-wheelers in the warehouse, multileveled storage facility is being created with fabricated sheets fixed on nuts and bolts. This multi-level storage facility serves the purpose of covered logistics facility space to store the additional vehicles. 2. Applicant s interpretation of law: 2.1 The CGST Act, 2017 was implemented with the object of avoiding the cascading effect of various indirect taxes. It is based on the VAT concept of allowing credit of tax paid on inputs, input services and capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is business and the said amount shall be credited to the electronic credit ledger of such person. Therefore, in view of Section 16 of the CGST/HGST Act, the Applicant being a registered taxable person, is statutorily entitled to avail the benefit of input tax credit on the supply of goods/capital goods and various services which are consumed or utilized for the construction and leasing out of the aforesaid warehouse and set off the same against the CGST/HGST payable on the rentals received from the lessee of the said warehouse as there is no break in the supply chain of Applicant No.1 and the receipt of rentals and the tax payable thereon are the direct and inexorable consequence of the construction of the covered logistics facility space and the payment of GST on the input goods/capital goods and services which have been consumed and utilized for the construction of the covered logistics facility space. 2.7 However, the benefit of input tax credit has been denied to the Applicant by applying Section 17 (5) (d) of the CGST/HGST Act. The said Section 17 (5) (d) of Act inter alia provides that notwithstanding anything contained in sub-section (1) of Section 16 of both the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the builder was made the decisive factor by the legislature. Precisely, the same approach is expected to be adopted in the present case. Otherwise, it would be highly arbitrary and discriminatory application of the provision. Two categories of builders are mentioned in GST Act, one in paragraph 5(b) of Schedule II and the other in Section 17 (5) (d) of the CGST Act/HGST Act. But the case of the Applicant is completely different from the two categories mentioned hereinbefore. The warehouse which the Applicant is constructing is neither intended for sale nor on his own account but it is intended for letting out. Therefore, by no stretch of imagination, it can be concluded that the warehouse which is constructed by the Applicant is intended for sale or on his own account and as such when the said warehouse is constructed for the purpose of letting out then such construction of the warehouse will not come within the mischief of Section 17(5)(d) of the CGST as well as HGST Act. On the aforesaid position of law, if the case of the Applicant is brought under section 17 (5) (d) then several words have to be read into Section 17 (5) (d) of the CGST/HGST, which is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Credit under the provisions of section 16 and 17 of the CGST Act, 2017? 3.2 Whether Input Tax Credit of GST in respect of inputs in form of goods and services be eligible if the goods and services are consumed and used in construction of covered logistic facility space when the said Input Tax Credit would be utilized in order to discharge and pay CGST and HGST/ IGST on rent received from tenants of the warehouse. 4. Discussion: 4.1 The applicant M/s Dhingra Trucking Pvt. Ltd. is a registered taxable person, engaged in the construction of logistic facility. The applicant has entered into an agreement with an auto manufacturer company wherein it has agreed to leasing of logistic space for commercial use. It has also agreed to provide electricity backup, loading and unloading ramps, and services such as service lift and electric equipment alongwith their maintenance. The applicant has approached the Authority of Advance Ruling for seeking a Ruling on the issue whether the applicant is entitled to claim credit of input tax paid on the inward supply of capital goods as well as the other goods and services. 4.2 As per the submission of the applicant, it is entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies or transactions to be treated as supply of goods or supply of services. Para 5 of this schedule reads: The following shall be treated as supply of services, namely:- (a) . (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. 4.8 There is no doubt regarding the applicant being a supplier of service under Para 5(b) of Schedule II. 4.9 Section 16 entitles a registered person to claim credit of input tax charged on any supply of goods or services to him whereas Section 17 is an overriding provision to Section 16. Section 17(5)(d) clearly spells out that the Input tax credit shall not be available in respect of goods and 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. Further, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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