When we read the text of Section 17(5)(d) together with its explanation, we find that for triggering the restriction under this clause, certain criteria have to be satisfied viz:
a) The goods or services should be used for construction of immovable property.
b) The construction can be in the form of reconstruction, renovation, additions or alterations or repairs to the immovable property.
e) The construction should be on his own account.
d) The goods or services received are capitalised in the books of account.
Only when all the above criteria are satisfied can it be said that the credit is restricted and the goods and services are ineligible for input tax credit.
Here, as per above provisions of blocked credit under section 17(5)d of GST Act, the most crucial point to determine whether Input tax credit is restricted or not is ” Construction Of Immovable Property “. So, if any goods or services or both used/consumed for the purpose of construction of Immovable Property whether input goods used is movable in nature, all input goods and services are restricted under section 17(5)(d).
Now we understand that All Input Goods Used/Consumed for construction of immovable property are restricted that leads creation of following litigations.
1) Whether desks, chairs, tables, couches, filing cabinets, detachable slidings , stackable glass and fixtures are anything attached to your building or structure that, if removed, would cause damage will considered under definition of immovable property or not??? If considered, than it is treated as plant & machinery or not ?????
2) Whether Air Conditioning Plant/Centralized Cooling System which is considered under definition of Immovable property or not??If considered, than it is treated as plant & machinery or not ?????
3) Whether a lift is an immovable property (i.e., part of a building) or whether it could be regarded as ‘plant and machinery.??????
FROM THE ABOVE LITIGATIONS, IT IS BEING SEEING THAT, THEIR IS NEED FOR CLARIFICATION ON “DEFINITION OF IMMOVABLE PROPERTY”
However, The term “immovable property” has not been defined in the GST law but rather it is defined in Section 3(26) of the General Clause Act, 1897 i.e.
1) Immovable Property means including Land, benefits arising out of land, and things attached to the earth,
2) or permanently fastened to anything attached to the earth.
Attached to earth is defined in section 3 of the Transfer of Property Act:-
(a) rooted in the earth, as in the case of trees and shrubs:
(b) imbedded in the earth, as in the case of walls or buildings,
(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached.
Explanation for the purpose of Chapter V and Chapter VI of the CGST Act, 2017 states the meaning of “Plant and Machinery” but till date No definition under section 2 defines “Plant and Machinery”
Although the explanation for the purpose of ITC states the phrase ‘Plant and Machinery’ under GST laws, the phrase Plant or Machinery’ has not been defined.
It is critical to note that Section 17(5) (d) of the CGST Act, 2017 uses the phrase, ‘Plant or Machinery’, which as indicated supra, has not been defined under the GST laws. Hence, references must be drawn from the dictionary meanings (i.e. legal dictionaries), meaning ascribed to it under other laws, and judicial pronouncements under the allied laws to understand the phrase, In this regard, various rulings are passed on the basis of following :
1. Definition under legal dictionaries:
a) As per Law Lexicon, “Plant” means the fixtures, machinery, tools, apparatus, appliances etc., necessary to carry on any trade or mechanical business, or any mechanical operation or process.
b) As per Law Lexicon, “Machinery” means something more than a collection of ordinary tools. It means more than a solid structure built upon the ground, whose parts either do not move at all or if they do move, do not move the one with or upon the other in interdependent action with the object of producing specific and definite result.
By acknowledging definition of Immovable Property and Plant and Machinery, the above litigations had been solved.
1) In Case of M/s We Work India Management Pvt. Ltd. AAAR (Karnataka) had passed ruling on detachable slidings , stackable glass which are considered as movable in nature and can”t used in construction of immovable property
2) In case of M/s Nikhil Comforts AAR(Maharashtra) had passed ruling that Air conditioning Plant is not immovable property. Hence, applicant supply is covered under ” Composite Supply”.
3) In case of M/s Tarun Realtors Pvt Ltd. AAR(Karnataka) and Las-Palmas Co-operative housing Pvt. ltd. AAR (Maharashtra). Both shall not get ITC on input goods or services or both on construction of Lift/Elevators.