CA Manoj P Gupta
Query : A Company is setting up its Plant in Pithampur. The Construction of factory building is going on. The Input Tax Credit of Input & Input Services used in the construction of building is not available in view of the provisions of the block credit as provided in the Sec 17(5) of CGST Act. But whether the credit of input & input services used for the construction of structure or foundation for erection /installation plant & machinery will be available ?Whether the same can be treated as part of plant & machinery ?
Building and Plant & Machinery are capital goods. As per the provisions of GST, entire Input Tax Credit of GST paid on capital goods will be available in first year itself, as these are ‘goods’, except Input Tax Credit of Input & Input Services used in the construction of building. Thus the ITC of Palnt & Machinery is available but not of building.
But what will happen to the input tax credit in respect of input & input services used for the construction of structure or foundation for erection /installation of plant & machinery which are integral part of plant & machinery .Can ITC of the same be availed treating them as part of plant & machinery ? The provisions related to the same are discussed in the below paras :
ITC is available on Capital Goods. ‘Capital Goods’ is defined in section 2(19) of CGST Act . As per section 2(19) of CGST Act “Capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the credit and which are used or intended to be used in the course or furtherance of business –
Meaning of ‘capital goods’ for the purpose of ITC has been further clarified. Accordingly, “capital goods” shall include “plant and machinery” as defined in the Explanation to section 17 of CGST Act – Explanation below Rule 45 of CGST and SGST Rules, 2017.
For the purpose of Chapter V of CGST Act (Input Tax Credit) and Chapter VI of CGST Act (Registration), expression ‘plant and machinery’ is defined as follows [Explanation to section 17 of CGST Act].
“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.
Thus for the purpose of claiming Input Tax Credit , foundation and structural support are included in the definition of Plant & Machinery and therefore the ITC can be very well claimed for the same.
Following cautions to be taken :
Project architect’s certificate can be taken certifying the portion of civil work as foundation and structural support of plant & machinery.
(Author is associated with K K & Company Chartered Accountants, Indore)