The Telangana Authority of Advance Ruling (AAR) ruled that ITC can be availed on GST charged by contractor supplying service of works contract to the extent of machine foundation.
The applicant M/s. Vijayaneha Polymers Pvt Ltd., has constructed a factory building wherein they have hired works contractors for executing the construction in different ways NAMELY Where the applicant provided material and contractor provided construction services and the contractor provided both material and services.
Such construction included foundation of machinery, rooms for chillers, boilers, generators and transformers, erecting of electrical poles, laying of internal roads, factory building, internal drainage, laboratory etc. the applicant is desirous of obtaining clarification regarding eligibility of ITC on the amounts charged by the contractor for these services.
The applicant has sought the advance ruling on the issue of availability of ITC on GST charged by the contractor supplying service of works contract.
The coram of Raghu Kiran and S.V. Kasi Visweswara Rao ruled that ITC cannot be availed on works contract services for construction of an immovable property except for erection of plant & machinery. ITC can be availed on plant & machinery as defined in the explanation to Section 17 i.e., on apparatus, equipment & machinery fixed to earth by foundation or structural support; which means plant & machinery and machine foundation are eligible for ITC. Plant & machinery will not include building or other civil structures and pipelines laid outside factory premises. ITC cannot be availed on goods or services or both received by a taxpayer on his own account for construction of immovable property.
Therefore, the AAR ruled that the applicant is eligible for ITC to the extent of machine foundation only.
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