In re The Varachha Co Op Bank Ltd [Advance Ruling No. GUJ/GAAR/R/37/2021 dated July 30, 2021], M/s. The Varachha Co Op Bank Ltd (Applicant) having undertaken construction of their New Administrative Office has sought an Advance Ruling on applicability of Input Tax Credit (ITC) on Services like Central Air Conditioning Plant, New Locker Cabinet, Lift, Electrical Fittings like Cables, Switches, Ncb, etc., Roof Solar, Generator, Fire Safety extinguishers, Architect Service Fees and Interior Designing Fees.
The Hon’ble Gujarat Authority of Advance Ruling (“GAAR”) bifurcating the matter in 9 heads has observed the ITC for Central Air Conditioning Plant, Lift, Electrical Fittings, Fire Safety Extinguishers and Roof Solar Plant would be blocked since they are immovable properties as per Section 17(5)(c) of the Central Goods and Services Act, 2017 (“CGST Act”) which provides for non availment on ITC on Works Contract Services for construction on Immovable Property.
Referring to Central Board of Excise and Customs (“CBEC”) Order No. 58/1/2002-Cx dated January 15, 2002 which was issued for the purpose of uniformity in connection with classification of goods erected and installed on site stated that Refrigeration/ Air Conditioning Plant are basically in the nature of systems and are not machines as a whole, though each component is dutiable, the refrigeration/air conditioning system as a whole cannot be considered to be excisable goods and Air conditioning units. Further placing reliance on Commissioner of C. Ex., Indore Vs. Globus Stores (P) Ltd. 2011 (267) ELT (435) (S.C.) held Air conditional Plant as an immovable property, therefore, ITC not being available.
Further noted that in the case of Architect Service and Interior Decorator fees, ITC will not be available under Section 17(5)(d) of the CGST Act which denies ITC on goods or services or both received by a taxable person for construction of an immovable property on his own account used in course or furtherance of business. However, ITC would be admissible on the New Locker Cabinet and Generator being movable goods.
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“………..FURTHER NOTED THAT IN THE CASE OF ARCHITECT SERVICE AND INTERIOR DECORATOR FEES, ITC WILL NOT BE AVAILABLE UNDER SECTION 17(5)(D) OF THE CGST ACT WHICH DENIES ITC ON GOODS OR SERVICES OR BOTH RECEIVED BY A TAXABLE PERSON FOR CONSTRUCTION OF AN IMMOVABLE PROPERTY ON HIS OWN ACCOUNT # USED IN COURSE OR FURTHERANCE OF BUSINESS. ##
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In my well-founded perspective, and firm longstanding conviction, the two expressions, -‘for construction of an immovable property on his own account ‘ and ‘used in course of furtherance of business’ are mutually self-contracting ; and that has, by and large, been responsible for conflicting / confusing views being taken by the ‘Authorities’ in like cases !
Further, if the same underlying logic were to be applied, it makes no sense, much less appeals to one’s ‘COMMON SENSE’ in levying GST on a realtor/ promoter, and in turn, on the ‘purchaser ‘, of a Flat/Apartment in a ‘ongoing building project under construction’ by virtue of an unholy gimmick of ‘DEEMING’ it as a ‘WORKS CONTRACT’.
Anyone with expert thoughts to spare and eminently share !?!
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