TMI Blog2021 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... truction of civil structures/ administrative block/ factory/ building sheds (having plant and machinery inside it )vis- -vis the proportion of plot area used for installation of pipes fitted on supporting structures in the open on the land, if that be the case, cannot be taken as a basis for awarding a proportionate credit, for the CGST Act and Rules have not envisaged such a mechanism to award proportionate credit for GST in such cases. GST amount borne by GNAL on subject service received is blocked credit vide Section 17(5)(d) CGST Act and thereby ineligible for availment of credit. - GUJ/GAAR/R/53/2021 - - - Dated:- 18-10-2021 - SANJAY SAXENA AND ARUN RICHARD MEMBER Present for the applicant : 1. Shri Ketan Shah, CEO, 2. Shri N. B. Tripathi, CFO, 3. Shri Dhruvit Shah, DM(F), 4. Shri Willingdon Christian, Advocate, 5. Shri R C Thakkar, CA, 6. Ms. Uruta Maheshwari, CA, 7. Shri Kiza Subramnayam, Consultant BRIEF FACTS M/s GACL-NALCO Alkalies Chemicals Private Limited (hereinafter referred to as GNAL for the sake of brevity) is a joint venture of M/s. Gujarat Alkalies and Chemical Limited (hereinafter referred to as GACL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement and is setting up Caustic Soda and Captive Power Plant on the leased property to manufacture Caustic Soda. After manufacturing of Caustic Soda through aforesaid two plants, the Caustic Soda which will be supplied to customers including its promoters, which qualifies as taxable outward supply under GST. b) As the leasehold rights are acquired for setting-up including erection, installation and commissioning of the said two plants for rendering taxable outward supplies, ITC of GST chargeable on transfer of leasehold rights should be eligible in terms of Section 16 of the CGST Act as the same is to be used in the course or furtherance of business. c) Section 17(5)(d) of the CGST Act provides for restriction on availment of ITC qua the goods and/or services received by a taxable person for construction of an immovable property on his own account including when such goods or services or both are used in the course or furtherance of business. However, the said provision carves out a specific exception for construction of Plant and Machinery . Test of movability/immovability is, therefore, immaterial to determine the eligibility of ITC once the items in question qualify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares that they shall include. The definition of input service seeks to cover every conceivable service used in provision of outward supply. Therefore, the charges for lease of land is an input services in terms of section 2(16) of the CGST Act, 2017 and SGST Act, 2017. g) The word business is to be understood as continuous activity and not confined or restricted to mere manufacture of the product or provision of a service. Activities in relation to the business cover all activities that are related to the functioning of the business. Words in the course or furtherance further widens the scope. The functions primarily encompass the entire gamut of activities involved in the process of manufacture of goods or provision of service. The other functions are in the realm of obligations some self-imposed and others by way of laws enacted for the welfare of the working class. The definition of input services' clearly highlights the dichotomy of multifarious functions any business organization is required to undertake while pursuing their objectives. Therefore, it is apparently clear that the lease charges paid for land has been used in course of business and eligible for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; (b) the following supply of goods or services or both:- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; (iii) rent-a-cab, life insurance and health insurance except where (A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the scope of GST. The activity of leasing of land is not included in Schedule III of Act and as such the activity of leasing of land amounts to Supply under Section 7 of the Act. Further, the activity of leasing of land has specifically been included in Schedule II of GST Act as supply of service and is thus liable to GST. In order to substantiate the same the Applicant would like to refer the recent judgement by Hon ble High Court of Bombay in Builders Association of Navi Mumbai Anr. Vs. Union of India and Ors [TS108-HC-2018 (BOM) NT] = 2018 (4) TMI 461 - BOMBAY HIGH COURT wherein the Hon ble High Court held that : expression supply includes all forms of supply of goods and/or services made or agreed to be made for a consideration by a person in the course or furtherance of business, and activities enlisted under Schedule II either as supply of goods or services would also be included therein; . As per Schedule II of CGST Act (Item No. 2), any lease, tenancy, license to occupy land and lease / letting out of a building for business is a supply of service , Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plants. The total area of land utilised exclusively for this purpose is 580 Sq.Mtrs. which is amounting to 0.148% (less than 1%) of the total land area of 3,90,999.90 Sq.Mtrs. v Based on the above details, the proportion of the consideration paid to GACL and the GST amount has been worked out for (a) Land Area used for the construction of Caustic Soda Plant and Power Plant and (b) Land Area utilised for the construction of supervisory / controlled units are as under: Particulars Area in Sq. Mtr Consideration amount (Rs.) GST Amount. (Rs.) Total land area acquired for setting up the CSP and Power plant by GNAL. 3,91,000 72,79,64,000/- 13,10,33,520/- Area of land exclusively utilised for the construction of supervisory / controlled units. 580 (Merely 0.148%) 10,77,388/- 1,93,930/- The relevant copy of Chartered Engineers and CA certificate is attached as Annexure- 2 Annexure 3. vi We would also like to inform you tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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:- (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; 13. We find that the law makes it explicitly clear that plant and machinery excludes land , as laid down in explanation following Section 17(5) CGST Act. We note the following: i. Law has expressed that Plant and Machinery excludes land in Section 17(5) CGST Act. ii. The phrase Plant and Machinery is used in Section 17(5)(c) CGST Act and the words plant or machinery is used in section 17(5)(d) CGST Act. We hold that the phrase plant or machinery in section 17(5)(d) may be read as plant and machinery . Here, We find it apt to quote a rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read for or and or for and even though the result of so modifying the words is less favourable to the subject provided that the intention of the Legislature is otherwise quite clear. Conversely if reading of and and or produces grammatical distortion and makes no sense of the portion following and , or cannot be read in place of and . The alternatives joined by or need not always be mutually exclusive. 16.Applying the above principle to the instant case, we are of the opinion that in this case, the word or in clause(d) of Section 17(5) of the CGST Act can be read as and since it appears to give effect to the intention of the Legislature to allow input tax credit on the construction of plant and/or machinery. ..... iii. The subject land leasing service from GACL to GNAL hinges on said leased land. iv. We cannot brush aside the position of law that Legislature has excluded land from plant and machinery. There must be an intent of Legislature to explicitly exclude the word land in the expression. With this expression of Plant and Machinery excluding land, explicitly incorporated in the Blocked Credit section 17(5) CGST Act, We hold that Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e crane girder shall be plate formed type considering all loads due to wheel loads and surge loads. All floors shall be of cast in-situ RCC slabs supported over RCC beams and RCC columns. The main Plant building shall be provided with windows and doors as required. Doors in the control room shall be made of extruded aluminium box frames fully or partly glazed. Partition walls in control room shall be provided for large openings meant for equipment entry. Large entry points shall be provided with electrically/ gear operated shutters. Main doors in the electrical and control rooms shall be seized considering the maximum size of panels. 14.2 Thus we hold that subject GST borne by GNAL is blocked credit under Section 17(5)(d) CGST Act for the land leased to it will be for the construction of civil structures, administrative block/ factory et al. Thus the plain meaning of the words of Section 17(5)(d) blocks the subject amount from credit admissibility. 15. GNAL during personal hearing informed that the construction activities and installation of their plant and machinery shall be capitalised and reflected in the financial accounts as Plant and Machinery . We are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up of industrial parks by private entities. Levy of GST on long term lease of land has been referred by GST Council to the GoM on Real estate. Present GST rate: Vide Sl. No. 41 of the notification No. 12/2017- CT( R) dated 28.06.2017 GST exemption is available on upfront amount payable in respect of service by way of granting of long term lease of industrial plot or plot for development of infrastructure for financial business, provided by the State Government Industrial Development Corporation or undertaking or by any other entity having 50% or more ownership of Government. The entry reads as under:- Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years or more of industrial plot or plot for development of infrastructure for financial business, provided by the State Government Industrial Development Corporation or undertaking or by any other entity having 50% or more ownership of Central Government, State Government, Union Territory to the industrial unit or the developer in any industrial or financial business area. Justificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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