ITC is not eligible for goods and services used for carrying out civil and external developmental works for setting up the MRO facility – AAR, Rajasthan
by ReinHeads Team | Jan 27, 2020
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ITC is not eligible for goods and services used for carrying out civil and external developmental works for setting up the MRO facility – AAR, Rajasthan
| Facts |
| · Indag Rubber Ltd. (‘the Applicant’) entered into an agreement with Elcom Systems Pvt. Ltd. (‘Elcom’) for leasing Maintenance Repair and Overhaul facility (‘the MRO Facility’) as per specifications given by Elcom
· For setting up fire-fighting system and electrical installations in the MRO Facility, the Applicant procures goods and services from Akansha Contracts Pvt. Ltd. (‘the Vendor’) on bill to ship to basis. The Vendor raised consolidated invoice which includes value of both goods and services and the Applicant availed input tax credit (‘ITC’) on the same
· The Vendor charges applicable Goods and Service Tax (‘GST’) on the goods and services supplied to the Applicant and the Applicant would further charge GST on the amount of rent received for leasing out the MRO Facility to Elcom |
| Issue before the Authority for Advance Ruling (‘AAR’) |
| · Whether the Applicant is eligible to claim ITC of the GST charged by Vendor for the supply of goods and services used for carrying out civil and external development work activity for setting up the MRO Facility for further leasing? |
| Discussion and Findings of the AAR |
- The nature of work undertaken by the Applicant for setting up the MRO facility consists both supply of goods and services leading to creation of an immovable property
- Section 16(1) of the Central Goods and Services Tax Act, 2017 (‘the CGST Act’) provides for availment of ITC on goods or services which are used or intended to be used in the course or furtherance of business.
- However, under Section 17(5)(d) of the CGST Act, ITC is not available in respect of goods/ services used for construction of an immovable property on his own account even when such goods or services are used in course or furtherance of business
- Section 17(5)(d) of the CGST Act is not only applicable in cases where the output supply is not taxable but the objective of the provision is to block ITC for construction of an immovable property. Accordingly, contention of the Applicant that taxable output supply will take place post construction is immaterial for determining eligibility of ITC
- The Applicant is paying GST on goods and services supplied by the Vendor for construction of the MRO Facility on its own land and Section 17(5)(d) of CGST Act clearly stipulates that ITC shall not be available in respect of goods and services used for construction of an immovable property irrespective of the use of the said property
- Thus, the Applicant is not eligible to claim ITC of the GST charged by Vendor for the supply of goods and services, which are used for carrying out civil and external development work for setting up of MRO facility.
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