Construction of sheds using Prefabricated technology is not permitted for Input Tax Credit (ITC) under Goods and Services Tax (GST), unanimously ruled by a two-bench member consisting of S.V. Kasi Visweswara Rao and Sahil Inamdar of Telangana Authority for Advance Ruling (AAR).
The applicant M/s. Sanghi Enterprises has claimed that they are constructing a shed on leased land and that such property being constructed is a prefabricated shed system. It was submitted that the shed is nothing more than an assembly of the System, which is prefabricated and pre-engineered components, fixed together in a modular form with nuts and bolts and without welding so that it can be easily unfixed.
S.V. Kasi Visweswara Rao (Addl. Commissioner of State Tax) observed that the Supreme Court considered even a temporary shelter such as a hut as an immovable property as long as it is for the beneficial enjoyment of the land to which it is attached. Applying this principle, the apex court of India held the doors and shutters which are generally fixed to the door frame in the wall with screws & nails to be immovable property.
Considering the assertions of the applicant regarding the procurement of ‘PFS’ and subsequent fitting to be in the course of business is concerned, it was admitted that the same is in the course of business but the question is whether the applicant is eligible to ITC in light of the provisions contained in section 17(5)(d) of the Central Goods and Services Tax, 2017/ Telangana Goods and Services Tax Act, 2017.
In light of the Supreme Court of India’s decision, Sahil Inamdar (Addl. Commissioner of Central Tax), made it abundantly clear that the “PFS” is built to utilise the space created over the land on which it is constructed; as a result, the warehouses built by the applicant using prefabricated structures constitute immovable property and are not eligible for an input tax credit under Section 17(5)(d) of the Central Goods and Services Tax Act.
The authority observed that if not for the purpose of beneficial enjoyment by way of conducting business on the RCC platform, the ‘PFS’ has no separate existence.
The AAR bench further noted that, because the “PFS” being built is an immovable property, the input tax credit is not allowed on inward supplies for its construction, including works contract services, because the credit falls under the category of blocked credits under sections 17(5)(d) and (c) of the CGST/TGST Act 2017.
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