GST UPDATE ON ITC ADMISSIBILITY ON FOUNDATION OF PLANT & MACHINERY

The admissibility of credit on goods used for laying foundation
of plant and machinery have been a matter of dispute since inception.
However, it was observed that since there is specific explanation clarifying the meaning of plant and machinery in section 17(5) of the CGST Act, 2017, there will not be any point for litigation. But, the recent advance ruling pronounced by the Authority for Advance Ruling of Andhra Pradesh has proved this wrong
and has instigated confusion in the minds of assessee. The Authority for Advance Ruling in the case of M/s Maruti Ispat & Energy Private Limited has held that the applicant is not eligible for availing input tax credit on goods/services used for foundation of plant and machinery and constructing its shed. It is pertinent to mention that the decision was taken merely on the basis
of photographs and no discussion as regards the provision contained in the explanation is different from the situation under consideration was made.

The Explanation to section 17(5) of the CGST Act, 2017 clarifying the meaning of plant and machinery reads as follows:-
For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural
supports but excludes—
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.

In our opinion, the explanation is very clear and leaves no room for any ambiguity that input tax credit of goods used in foundation or structural support is admissible to the assessee. However, the authority for advance ruling has pronounced its ruling in contradiction to the explanation given as produced above. Moreover, as regards admissibility of input tax credit on input services used for construction of foundation of plant and machinery is concerned, again, we submit that the restriction contained in section 17(5) (c) and 17(5)(d) is only with respect to construction of immovable property other than plant or machinery. As such, there is no embargo in availing input tax
credit of works contract services availed for construction of plant and machinery by the assessee.
It is further submitted that although the advance ruling is binding only on the assessee who sought it but it does have persuasive value. The decisions that are given without justifying the provisions contained in the law are the root cause of confusion. The decision of the advance ruling is bound to get challenged before the Appellate Authority for Advance Ruling.

We hope the above is useful to you.

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GST UPDATE ON ITC ADMISSIBILITY ON FOUNDATION OF PLANT & MACHINERY

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