Case Law Details
Kannur International Airport Limited (GST AAR Kerala)
Introduction: The Authority for Advance Ruling (AAR) in Kerala delivered a pivotal decision regarding the eligibility of Kannur International Airport Limited (KIAL) for claiming input tax credit (ITC) on construction-related goods and services. The ruling focused on the provisions of Section 17(5)(c) of the Central Goods and Services Tax Act, 2017 (CGST Act), which pertains to blocked credits, particularly in the context of works contract services for construction of immovable property.
Detailed Analysis: KIAL, a government-promoted entity responsible for providing airport and related services, commenced commercial operations on December 9, 2018. The query posed to the AAR revolved around the admissibility of ITC for taxes paid on various supplies associated with the construction of the airport, including runway and passenger terminal building (PTB), under contracts with Larsen & Toubro Limited (L&T).
The CGST Act, in Section 17(5)(c) and (d), restricts ITC on works contract services when used for construction of an immovable property, except when it is an input service for further supply of works contract service. KIAL’s contention was that certain activities undertaken as part of the construction process did not directly fall under the ‘construction’ of immovable property and thus, should not be subjected to ITC restrictions.
The AAR, after examining the submissions, highlighted that both contracts entered by KIAL with L&T for construction of the runway and PTB constituted a composite supply of works contract services for construction of immovable property. Therefore, the services and goods supplied under these contracts were integral to the construction of immovable property, rendering the ITC claimed on these supplies as blocked credits under the provisions of Section 17(5)(c) of the CGST Act.
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