2020(08)LCX0149(AAR)
AAR-HARYANA
M/s Synergy Global Steel Pvt. Ltd
decided on 28/08/2020
HARYANA AUTHORITY FOR ADVANCE
RULING,
GOODS AND SERVICES TAX,
HARYANA VANIJYA BHAWAN, PLOT NO 1-3, SECTOR 5,
PANCHKULA-134151 (HARYANA)
Advance Ruling No. HAR/HAAR/R/2019-20/03
(In Application No. 03/2019-20, dated 23.04.2019)
Name & Address of the Applicant | : | M/s Synergy Global Steel Pvt. Ltd., Plot No. 30, Industrial Area, Dharuhera, Rewari, Haryana |
GSTIN of the Applicant | : | 06AAJCS8313G1Z8 |
Date of Receipt of Application | : | 23.04.2019 |
Clause(s) of Section 97(2) of CGST/HGST Act, 2017, under which the question(s) raised. |
: | Clause (d)- Admissibility of input tax credit to paid or deemed to have been paid. |
Date of Personal Hearing | : | 17.07.2019 |
Present for the Applicant | : | Sh. Manoj Makkar (Adv.) & Sh. Arvind Bisla (Adv.) |
Memo No.: 1043/AAR
Dated: 28/08/2020
1. Brief facts:
1.1 M/s. Synergy Global Steel Pvt. Ltd., Plot No. 30, Industrial Area, Dharuhera,
Rewari, State- Haryana having GSTIN Number 06AAJCS8313G1ZB (hereinafter referred
as the ‘applicant’), have got a building constructed at Plot No. 30, Industrial
Area, Dharuhera for the purpose of leasing or renting out the same for running
an industry.
1.2 The applicant has stated that the ITC on works contract service or goods or
services or both received for construction of immovable property (other than
plant and machinery) is blocked by clause (c) and (d) of Section 17 (5) of CGST
Act, 2017; that they have not availed any ITC on the same.
1.3 Apart from the construction of building, they have ordered for the following
to be installed at the said building:
i. Supply and installation of Sewage Treatment Plant 20 KLD falling under HSN
842121; order given to M/s Krishna Engineering, Alwar;
ii. Supply and installation of Fire-fighting system; order given to M/s Cross
Fire India, Gurgaon;
iii. Supply of Cable for transmission of electricity from feeding point to the
building falling under HSN 8544; order given to M/s Debak Enterprises P. Ltd.,
Delhi;
iv. Supply of other material such as PCC Poles, structural steel, cable end kit,
HDPE pipes, GO switch etc. for laying of Cable and electrical installations for
transmission of electricity; order given to M/s Sigma Electro Control Engineers,
Gurugram;
v. Laying of Cable and electrical installations for transmission of electricity;
order given to M/s Sigma Electro Control Engineers, Gurugram.
2. Question on which advance ruling is required:
2.1 Whether ITC of GST paid on the aforesaid goods or services (i.e. supply and
installation of Sewage Treatment Plant, supply and installation of Fire-fighting
system, supply of Cable for transmission of electricity, supply of other
material for lying of Cable and electrical installations and Laying of Cable and
electrical installations for transmission of electricity) is admissible to the
applicant.
3. Statement of relevant facts having a bearing on the question raised:
3.1 The applicant states that all the expenditure incurred on the aforesaid
goods and services are of capital nature, a doubt came as to whether ITC on such
goods and services are admissible or not in terms of Section 17(5) of CGST Act,
2017.
4. Discussions:
4.1 The present application is to ascertain whether ITC of GST paid on the
aforesaid goods or services i.e. supply and installation of Sewage Treatment
Plant, supply and installation of Fire-fighting system, supply of Cable for
transmission of electricity, supply of other material for laying of Cable and
electrical installations and Laying of Cable and electrical installations for
transmission of electricity is admissible. To ascertain the admissibility of ITC
it is pertinent to have a look at the relevant Section of the GST Act, 2017.
4.2 Section 17(5) of the GST Act dealing with apportionment of credit and
blocked credits reads as under:
(5) Notwithstanding anything contained in sub-section (1) of section 16 and
subsection (1) of section 18, input tax credit shall not be available in
respect of the following, namely:—
(b) the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty treatment, health services,
cosmetic and plastic surgery, leasing, renting or hiring of motor
vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except
when used for the purpose specified therein, life insurance and health
insurance:
Provided that the input tax credit in respect of such goods or services
or both shall be available, where an inward supply of goods or services or both
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;
4.3 In the present application the applicant contends that they have got a
building constructed for the purpose of leasing or renting out the same
for running an industry. Input tax credit on leasing is not allowed as per
Section 17(5)(b)(i) of the CGST Act, 2017.
4.4 Section 17(5) (c) of the GST Act dealing with Apportionment of credit and
blocked credits reads as under:
(c) works contract services when supplied for construction of an
immovable property (other than plant and machinery) except where it is an input
service for further supply of works contract service;
Here it is necessary to discuss the definition of the works contract as defined
in Section 2(119) of CGST Act, 2017.
“works contract” means a contract for building, construction,
fabrication, completion, erection, installation, fitting out, improvement,
modification, repair, maintenance, renovation, alteration or commissioning of
any immovable property wherein transfer of property in goods (whether as goods
or in some other form) is involved in the execution of such contract;
The meaning of the works contract as cited above clarifies that a contract for
installation and fitting out of any immovable property wherein transfer of
property is involved, is works contract. In the present case the applicant has
ordered the following:-
i. Supply and installation of Sewage Treatment Plant to M/s Krishna Engineering,
Alwar.
ii Supply and installation of Fire-fighting system to M/s Cross Fire India,
Gurgaon.
iii. Supply of Cable for transmission of electricity from feeding point to the
building to M/s Debak Enterprises P. Ltd., Delhi.
iv. Supply of other material such as PCC Poles, structural steel, cable end kit,
HDPE pipes, GO switch etc for laying of Cable and electrical installations for
transmission of electricity to M/s Sigma Electro Control Engineers, Gurugram.
v. Laying of Cable and electrical installations for transmission of electricity
to M/s M/s Sigma Electro Control Engineers, Gurugram.
It is clear from the above that all the above goods or services or both are
covered under works contract and therefore, Input tax credit is not allowed as
per Section 17(5)(c) of the CGST Act, 2017.
4.5 Section 17(5) (d) of the GST Act dealing with apportionment of credit and
blocked credits reads as under:
(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;
In the explanation given above for the purposes of clauses (c) and (d) of
Section 17(5) of the CGST Act, 2017; it is clear that “construction” includes
additions to the extent of capitalisation, to the said immovable property.
It means the applicant has constructed a building for the purpose of leasing or
renting out the same for running an industry and the goods in question have been
added to the building already constructed. Therefore, the Input tax credit is
not allowed as per Section 17(5)(d) of the CGST Act, 2017 on all the items in
question.
4.6 The explanation to Section 17(5) (d) of the GST Act reads as under:-
Explanation:- 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 the explanation given above, it is clear that “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 with some
exclusions as above. In the present case the applicant admits that the Sewage
Treatment Plant is attached with the civil structure of the building. Thus, it
is clear that it is a part of the civil structure of the building and part of
the building so constructed. Therefore the applicant’s contention that the
Sewage Treatment Plant is covered under the definition of “plant and machinery”
is rejected because it is covered under the exclusion (i) of the explanation
given above.
4.7 Now, as per the definition of goods some movable property is excluded from
the category of goods whereas at the same time, some immovable properties are
treated as goods. But the terms movable and immovable property have not been
defined under the GST Act. In laymen terms, any goods that can move are movable
property and which cannot be moved is immovable property.
4.8 But the General Clauses Act 1897 and the Transfer of Property Act defines
both these terms. Section 3(26) of the General Clauses Act says:
“immovable property” shall include land, benefits to arise out of land, and
things attached to the earth, or permanently fastened to anything attached to
the earth”. Whereas, Section 3(36) defines movable property as
“property of every description, except immovable property”. So as per this
definition, any property which does not qualify to be immovable property is a
movable property.
4.9 As per Transfer of Property Act, immovable property does not include
standing timber, growing crops or grass. It further says that “attached to
the earth” means:
(a) rooted in the earth, as in the case of trees and shrubs;
(b) imbedded in the earth, as in the case of walls or buildings; or
(c) attached to what is so imbedded for the permanent beneficial enjoyment of
that to which it is attached.
As per the definition of immovable property contained in the General Clauses Act
and the Transfer of Property Act, it is clear that things attached to the earth
or permanently fastened to anything attached to the earth is immovable property.
Anything imbedded in the earth or attached to what is so imbedded for the
permanent beneficial enjoyment of that to which it is attached, qualifies to be
attached to the earth.
In the present case, the applicant constructed a building for the purpose of
leasing or renting out the same for running an industry. The said building is
imbedded in the earth as per clause (b) above and the goods in question
are attached to the walls or building so imbedded in the earth for the permanent
beneficial enjoyment of the building.
As far as, the contention of the applicant regarding installation of Sewage
Treatment Plant and Fire-fighting system to be covered under plant and machinery
is concerned, it is stated by the applicant that the same is installed as per
statutory requirement. Thus it is clear that these goods have been installed in
the building for the permanent beneficial enjoyment of the building.
Therefore, Input tax credit is not allowed as per Section 17(5)(d) of the CGST
Act.
4.10 As regards, the contention of the applicant regarding Cable and other
material such as PCC Poles, structural steel, cable end kit, HDPE pipes, GO
switch etc. to be covered under capital goods, it is clear that these goods also
have been installed in the building for transmission of power from outside
sources upto the premises. Thus, these goods are also for permanent beneficial
enjoyment of the building. Therefore, Input tax credit is not allowed as per
Section 17(5)(d) of the CGST Act.
4.11 The applicant has contended that the service of electrical installations
and laying of Cable have not been used for construction of any immovable
property. However, it is clear that these services also have been used in the
building for transmission of electricity in the premises. Thus, these services
are also for permanent beneficial enjoyment of the building. Therefore, Input
tax credit is not allowed as per Section 17(5)(d) of the CGST Act.
4.12 The Supreme Court in Triveni Engineering and Industry Limited (2000) case
observed that in order to determine whether an article is permanently fastened
to anything attached to the earth, both the intention as well as the factum of
fastening has to be ascertained from the facts and circumstances of each case.
The Allahabad High Court in S/S Triveni N L Limited has observed that
“permanently fastened to anything attached to the earth” has to be read in
the context for the reason that nothing can be fastened to the earth permanently
so that it can never be removed. If the article cannot be used without fastening
or attaching it to the earth and it is not removed under ordinary circumstances,
it may be considered permanently fastened to anything attached to the earth.
5. Ruling:
So, in light of the above discussion and findings, the Ruling of the Authority
on the question raised in the application is as under:
5.1 The ITC of GST paid on the Sewage treatment plant; Fire Fighting System;
Cable for transmission of electricity from feeding point to the building; other
material such as PCC Poles, structural steel, cable end kit, HDPE pipes, GO
switch etc. & Laying of Cable and electrical installations for transmission of
electricity is not admissible to the applicant in the lines discussed above.
Ordered accordingly.
To be communicated.
19.07.2019
Panchkula.
(Sangeeta Karmakar)
Member (CGST)
(Madhubala)
Member (SGST)
Regd. AD/Speed Post
M/s Synergy Global Steel Pvt. Ltd., Plot No. 30, Industrial Area, Dharuhera, Rewari, Haryana
Copy to:
1. The Commissioner of
Central Goods & Service Tax, Faridabad, GST Bhawan, Block 'C' & 'D', New
C.G.O. Complex, NH IV, Faridabad 121001, Haryana.
2. Deputy Excise and Taxation Commissioner, Rewari (ST).
Equivalent .