The Tamilnadu State Appellate Authority for Advance Ruling ( AAAR ) ruled that no Input Tax Credit ( ITC ) can be availed on the purchase of Rotary Car Parking System installed and commissioned at the premises of the Applicant, with the same being ineligible as per the Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (CGST Act).
The Appellate Application was filed by M/s Arthanarisamy Senthil Maharaj, a proprietorship unit falling under the administrative control of ‘State’, providing the taxable service of ‘Renting of Immovable Property Service’ under Service Accounting Code (SAC) 997212.
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The Present ruling was sought for by the Applicant to ascertain the admissibility of Input Tax Credit ( ITC ) on the ‘Rotary Parking System’ (RPS) under HSN Code 8428 subsequent to the ruling of the Authority for Advance Ruling disallowing the admissibility of ITC on RPS.
The Applicant, represented by A. Senthil Maharaj, Proprietor and K. Rajendran, Consultant submitted before AAAR that the supply of RPS involves two vital activities – supply of Goods under HSN 8428 and supply of installation service under SAC 995468, thereby making it a ‘composite supply’ where the supply of the Goods is the principal supply and the Installation being an incidental/ancillary service.
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Further representations were made by the Applicant that the installation of a car parking system is an essential facility provided to the Applicant’s tenants and their customers and is an independent installation, unlike an elevator which is deemed a part of the building.
The two-member Bench of the AAAR, Tamilnadu comprising Ashish Verma, I.R.S., Principal Chief Commissioner of GST & Central Excise Member and D. Jagannathan, I.A.S. Commissioner of Commercial Taxes Member observed that the RPS, being a ‘system’ is much more than an equipment or machinery as it involves the functionality of machines, equipments, motors, frame assembly, pallets, electrical panels, Hydraulic power packs, operator boxes and other electronic support systems along with a specialized civil foundation with steel structure to withstand the load of the vehicle.
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In light of the observations, AAAR determined that the RPS is not a ‘Plant or Machinery’ classifiable under Section 17(5) of the CGST Act, but rather a ‘Civil Structure’. AAAR further sought to conduct the ‘test of permanency’ to determine whether the RPS is a permanent structure or not.
AAAR deemed that the RPS was embedded to earth for the permanent beneficial enjoyment of the tenants of the complex for whom the premises along with facilities are rented out, vitiating the Applicant’s submission that they may sell or transfer the RPS at a later date as a means to prove the impermanence of the structure.
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The AAAR, Tamilnadu while dismissing the Appeal held that owing to the facts and submissions made on record, the RPS installed and commissioned at the premises of the Appellant amounts to the construction of an immovable property, thereby disentitling the availment of Input Tax Credit as per Section 17(5)(d) of the CGST Act, 2017.
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