In re Swan LNG Pvt. Ltd. (GST AAAR Gujarat)
AAAR held that (1) LNG Jetties being built by the appellant are not covered within the expression ‘plant and machinery’ as foundation to equipment, apparatus, machinery to be installed on it in terms of Section 17 of the CGST Act, 2017 and (2) the appellant cannot avail input tax credit of GST paid on inputs, input services and capital goods procured for the purpose of building the LNG Jetties in terms of Section 16 of the CGST Act, 2017.
Read AAR : GST: LNG jetties not falls within expression ‘plant & machinery’
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT
1. M/s. Swan LNG Pvt. Ltd., Ahmedabad (‘the appellant’ for short) has entered into a Concession Agreement dated 18th October, 2017 with the Gujarat Maritime Board and Government of Gujarat for development, construction, operation and maintenance of Liquefied Natural Gas (‘LNG’) Port with a Floating Storage and Regasification Unit (‘FSRU’) facility near Jafrabad, Gujarat, on Build, Own, Operate and Transfer basis. As a part of developing the LNG Port and FSRU facility, the appellant is developing an Import Terminal for FSRU near the village Bhankodar, near Jafrabad, Gujarat. After development of the said Import Terminal, the appellant intends to provide LNG re-gasification service to prospective customers.
2. The applicant had raised following questions before the Gujarat Authority for Advance Ruling [‘GAAR’], Goods and Service Tax:
(i) Whether in terms of Section 17 of the CGST Act, 2017 read with GGST Act, 2017, the LNG jetties proposed to be built by the applicant can be said to be covered within expression ‘plant and machinery’ as foundation to equipment, apparatus, machinery to be installed on it?
(ii) Whether as per Section 16 read with Section 17 of the said Acts, the applicant can accordingly avail ‘input tax credit’ of GST paid on inputs, input services as well as capital goods procured for the purpose of building the LNG jetties?
3. Before starting discussion, we reproduce extracts of Section 16 and 17 of the CGST Act, 2017, which are relevant to this appeal:
SECTION 16. Eligibility and conditions for taking input tax credit. — (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
… … … … … …
SECTION 17. Apportionment of credit and blocked credits. — … … … … … …
(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :—
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(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
(6) … … … … … …
Explanation. — For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” means apparatus, equipment, and machinery 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 —
(a) land, building or any other civil structures;
(b) telecommunication towers; and
(c) pipelines laid outside the factory premises.
(emphasis supplied)
4. It was the claim of the appellant before GAAR that LNG Jetty being constructed by them is ‘foundation’ of the ‘plant and machinery’ to be installed on it for making outward supply; therefore, such foundation is included in the expression “plant and machinery”, as defined in the Explanation to Section 17 of the CGST Act, 2017. In their application dated 14.06.2019 for Advance Ruling, the applicant has submitted a layout of plant & machinery installed or to be installed on the said foundation as under:
The applicant had mentioned names of plant & machinery mentioned in upper side of the above picture (from left to right):
