AAR Rajasthan Refused Advance Ruling as Construction Was Already Completed

In re CPL Pharmaceuticals Private Limited (GST AAR Rajasthan)

The Authority for Advance Ruling, Rajasthan examined an application concerning eligibility of input tax credit (ITC) on works contract services used for construction of foundation and structural support for plant and machinery installed in a factory manufacturing lyophilized injectable drugs. The applicant had set up a new manufacturing plant in Rajasthan and engaged a contractor for extensive civil, RCC, structural steel and allied works required to install heavy pharmaceutical machinery. GST was paid by the contractor under construction services, and the applicant availed ITC on such services, claiming that the foundations and structural supports formed part of “plant and machinery” as defined in the Explanation to Section 17 of the CGST Act, which expressly includes foundations and structural supports.

The jurisdictional officer opposed the claim, contending that the activities constituted construction of immovable property and were blocked under Sections 17(5)(c) and 17(5)(d). According to the officer, excavation, RCC work, flooring, formwork, reinforcement, steel structures and pipelines were civil works related to immovable property, making ITC ineligible.

The Authority noted that the question raised pertained to admissibility of ITC and fell within Section 97(2)(d) of the CGST Act. It reproduced the relevant statutory provisions, including Section 17(5)(c) and the Explanation defining “plant and machinery,” which includes apparatus, equipment and machinery fixed to earth by foundation or structural support, along with such foundation and supports, while excluding land, buildings, civil structures, telecommunication towers and pipelines laid outside the factory premises.