In re Colourband Dyestuff P Ltd (GST AAR Gujarat)
Colourband Dyestuff P Ltd, a dye manufacturing company, has filed an application seeking an advance ruling on the eligibility of input tax credit (ITC) for the works contract services and materials used for the foundation and structural supports of their machinery. The applicant argues that the foundation and supports should be considered as part of the plant and machinery, which qualifies for ITC. The authority has considered the applicant’s submissions, along with relevant provisions of the CGST Act, and examined the photographs and certificate provided. The authority concludes that ITC is not available for works contract services and materials used for the construction of an immovable property, except for plant and machinery. However, the foundation and structural supports are explicitly included in the definition of plant and machinery, making them eligible for ITC. The ruling provides a detailed analysis of each item’s eligibility and clarifies the applicant’s claim. AAR Ruled as follows:-
[a] Works contract services (WCS) taken for structure on which machineries are fixed to earth by foundation and services taken for setting up plant i.e. MS steel structure is eligible subject to findings from para 19 onwards. Input Tax Credit (ITC) on structure/shed, erected on the left side of the Sand mill and spray dryer and the ITC on the structure/shed [i.e. roof and its supports] is not eligible. ITC in respect of foundation and support structure in respect of ETP [Effluent Treatment Plant] and Transformer is blocked in terms of Section 17(5) of the CGST Act, 2017.
[b] Steel [TMT bar] being procured by the applicant company and used while taking works contract services for making the said foundation to fix machineries to earth is eligible subject to findings recorded in para 19 onwards.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
Brief facts:
Colourband Dyestuff P Ltd, Block No. 243, At & Post Ekalbara, Tai. Padra, Ekalbara, Vadodara, [for short-*applicant’] is registered under GST and their GSTIN is 24AAACC9898F1ZC.
2. The applicant is engaged in the activity of manufacturing of dyes. The applicant procures intermediate as raw material in crude form which is chemically processed & through HAG machineries ie Hot Air Generation, Liquid raw material is being converted into powder form which is known as dyes ie finished product which is applied to textile products.
3. The applicants plant is located at Ekalbara,, Ta. Padra, Vadodara. They are expanding & have acquired new land viz plot no. 109/110 at GIDC Sykha, Dist. Bharuch. The applicant intends to set up the factory at one premise using both the plots & have started setting up of the new factory.
4. The manufacturing process flow chart is provided as Annexure 1 to their application. For manufacturing Dyes, they require various plant and machinery7 [for short – ‘P&M’j, primary being Sand Mill and spray dyer and HAG machine. These machines are required to be fixed on earth by foundation or various structural supports which are of MS steel/foundation structure.
5. The applicant in his application has fairly admitted that the ITC on works contract utilized in Administration building and Warehouse would be treated as blocked credit. However, he is before us seeking a ruling on the eligibility of ITC on works contract services & material procured and utilized towards foundation for setting up of the following machineries
