In re Shibaura Machine India Private Limited (GST AAAR Tamil Nadu)
The Tamil Nadu Appellate Authority for Advance Ruling (AAAR) dismissed the appeal filed by a manufacturing company challenging the denial of Input Tax Credit (ITC) on GST paid for installation of firefighting systems and public health engineering (PHE) works undertaken as part of the expansion of its factory. The appellant had entered into a composite works contract for construction of a new factory, which included civil works, pre-engineered buildings, firefighting systems, and public health engineering systems such as sanitation, sewage, water supply, and rainwater harvesting.
The appellant argued that firefighting and PHE systems qualify as “plant and machinery” and are mandatory infrastructure under labour and safety laws, contending that ITC should be allowed as these systems are used in the course or furtherance of business. It was further claimed that several components were movable in nature and capable of dismantling without damage, thereby falling outside the scope of “immovable property” under Section 17(5) of the CGST/TNGST Acts.
After detailed examination, the AAAR held that the contract was a composite works contract resulting in construction of immovable property. It observed that firefighting and PHE installations are integrated into the factory building through concealed pipes, fittings, walls, and structural supports, and once installed, they become inseparable from the immovable property. Applying tests of annexation, intendment, permanence, and marketability, the authority concluded that these systems are meant for permanent beneficial enjoyment of the land and have no independent marketable existence.
