Can ITC be availed on non-civil constructions like shed prepared with
-PUF/any other materials?
-PUF /any other materials purchased for construction of shed?
Presuming that the shed is constructed or fabricated for long-term usage as a closed premise either for storage or assembly unit or any other purpose, then in order to ascertain the availability of ITC, we need to know the following:
Section 17(5) blocks ITC in respect of certain goods and services. One such service is works contract service as per section 17(5)(c). Section 2(119) defines the term “works contract” as follows:
“Works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; The provisions of section 17(5)(c) & (d) are relevant here and are reproduced hereunder:
“(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.”
Further, as per the Explanation to the above clauses, the term “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property;
If is further explained that 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—
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.
Based on the above premised legal provisions, the following parameters are decided:
- Construction of shed, though a non-civil construction, will get covered as “works contract service” under the term “fabrication”.
- As per the explanations provided above, ITC will be ineligible to the extent of capitalization.
- Construction of the shed will not get covered within the ambit of the term “plant and machinery”.
On combined reading of the above provisions, it is clear that ITC on works contract service will be blocked unless it is used for further provision of works contract service. Since, in this case, the same is used for self-consumption, ITC will be ineligible. Moreover, since the expenditure incurred may be capitalized, ITC will not be eligible on this account also. Further, the ITC on purchase of PUF materials for the purpose of construction is also blocked under section 17(5)(d).
Below two AAR decisions are also decided against the TP.
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