ITC Applicable for Machinery Foundation and Structural Supports, as included in Definition of Plant and Machinery: AAR [Read Order]
ITC – Machinery – AAR – Plant and Machinery – Definition of Plant and Machinery – Taxscan
ITC – Machinery – AAR – Plant and Machinery – Definition of Plant and Machinery – Taxscan
The Gujarat Authority for Advance Ruling (AAR), recently ruled that input tax credit (ITC) is applicable for machinery foundation and structural supports, as included in definition of plant and machinery.
The applicant, Colourband Dyestuff Pvt Ltd, is engaged in the activity of manufacturing of dyes. The applicant procures intermediate as raw material in crude form which is chemically processed and through HAG machineries i.e Hot Air Generation, Liquid raw material is being converted into powder form which is known as dyes i.e finished product which is applied to textile products.
The applicant has filed an application seeking an advance ruling on the eligibility of input tax credit (ITC) for the works contract services and materials used for the foundation and structural supports of their machinery.
The applicant's primary contention while contending that they are eligible for ITC is because the structure and building are independent and separate and that the foundation is being built to support the P&M & other equipment that it is to be installed on its deep foundation. The applicant also pointed out that the foundation is to make the plant immovable & hence the foundation does not amount to immovable property and that for making outward supply of dyes [their finished product], raw material has to pass through different chemical process from one civil structure to another.
Plant and Machinery means: apparatus, equipment, and machinery, which is 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 – land, building or any other civil structures; – telecommunication towers; and – pipelines laid outside the factory premises.
The authority has considered the applicant’s submissions, along with relevant provisions of the CGST Act, and examined the photographs and certificate provided.
A Two-Member Bench of the Authority comprising Milind Kavatkar (Member, SGST) and Amit Kumar Mishra (Member, CGST) concluded that “Works contract services (WCS) taken for structure on which machineries are fixed to earth by foundation and services taken for setting up plant i.e. MS steel structure is eligible subject to findings from para 19 onwards. Input Tax Credit (ITC) on structure/shed, erected on the left side of the Sand mill and spray dryer and the ITC on the structure/shed [i.e. roof and its supports] is not eligible.”.
The Bench also ruled that ITC in respect of foundation and support structure in respect of ETP [Effluent Treatment Plant] and Transformer is blocked in terms of Section 17(5) of the CGST Act, 2017. Steel [TMT bar] being procured by the applicant company and used while taking works contract services for making the said foundation to fix machineries to earth is eligible.
To Read the full text of the Order CLICK HERE
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