In re INOX Air Products Pvt Ltd (GST AAR Tamilnadu)
Whether INOX would be entitled to avail and utilize ITC of GST Charged by IPL if such transaction is considered to be a supply?
In the case at hand, it is seen that INOX had paid ‘consideration’ to IPL, for agreeing to partwith their rights in the leasehold held by IPL, on the land required by the applicant. IPL had consented against such consideration and applied for withdrawing the leasehold held by them in favour of the applicant and on approval by SIPCOT, the applicant has entered into a lease agreement with SIPCOT on payment of necessary charges as required and acquired the leasehold rights for the land. Thus, it is evident that the amount paid is towards acquiring their entitlement to take on lease the land required for putting up a State of the art Ultra High Purity Cryogenic Liquid Medical and Industrial Oxygen Plant. The land is acquired in the course of business and by definition ‘business’ under GST(section 2(17) of the Act), includes services in connection with the commencement of business, therefore the transaction is in the course or furtherance of business. The applicant is a registered person and therefore is entitled to avail credit of the supplies received by them in the course or furtherance of business as per Section 16(1) of the Act. The applicant has stated that as the ‘Air Separation Unit(ASU)’ which is put up on the land leased is a ‘Plant and Machinery’, the restriction at Section 17(5)(d) is not applicable in respect of the goods and services used for the construction of such Plant and Machinery.
Also Read AAAR Order in this case: ITC Denied on Leasehold Rights as Linked to Construction of Immovable Property: AAAR Tamilnadu
Section 17(5) of the Act, starts with the Non-obstante clause, `Notwithstanding anything contained in sub-section (1) of section 16′, which indicates that the provisions under Section 17(5) prevails over section 16(1) of the Act. From the explanation of ‘Plant and Machinery’, it is evident that while ‘Plant and Machinery’ includes foundation and structural supports required to fix apparatus, equipment, machinery on the earth, land building or other civil structures are specifically excluded. From the pictures shared during the hearing and furnished by them, it is seen that in the leased land, Main Air Compressor 86 Nitrogen Compressor Shed, Compander Box, TSA Bed, OM Plant, SMR Unit, Hydrogen Compressor 86 Back up Quad shed, LNG area, Admin Building, etc which makes a complete manufacturing plant is put up. The service received from IPL is towards facilitating the lease acquisition of the land by the applicant. Therefore, the ASU, even if it qualifies as a ‘Plant and Machinery’ (we do not discuss whether ASU per-se is a ‘Plant and Machinery’ and refrain extending any conclusion in this context), the ‘land’ leased is not a ‘Plant and Machinery’ because of the explicit, specific exclusion provided in the GST Law in the Explanation to ‘Plant and Machinery’. The services availed from IPL is in relation to acquiring lease of the land. By the specific exclusion in the definition of ‘Plant and Machinery’, as land stands excluded from ‘Plant and Machinery’, the services availed and utilized for acquiring such land on lease is restricted under Section 17(5)(d) of the CGST Act 2017, though the activity is in the course or furtherance of the business of the applicant and the credit of GST if payable on such supply is not eligible as credit to the applicant.
The applicant is not entitled to avail and utilize ITC of GST charged by IPL as the same is restricted under Section 17(5)(d) of the CGST/TNGST Act 2017, if such transaction is considered to be a supply.
