Introduction: In a recent ruling, the Tamil Nadu Authority for Advance Rulings (AAR) in the case of M/s. A Senthil Maharaj determined that Input Tax Credit (ITC) is not admissible for Rotary Car Parking Systems. This decision hinges on the classification of these systems as immovable property, thus falling under blocked credits as per Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (CGST Act).
Facts:
M/s. A Senthil Maharaj (“the Applicant”) is engaged in the business of supplying services of immovable property by way of installation of multi-layer car parking system within the campus of existing building for the purpose of providing car parking facilities to the tenant. The Applicant has filed an application for advance ruling on whether ITC is admissible on “Rotary Parking System” which is falling under HSN Code 8428. The primary contention of the Applicant is that the Rotary Parking System is not attached to the earth permanently and therefore, cannot be construed to have the status of immovable property and therefore would not fall within the purview of blocked credit under Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
Issue:
Whether ITC is admissible in case of Rotary Car Parking System?
Held:
The AAR, Tamil Nadu in Advance Ruling No. 07/ARA/2024 held as under:
- Observed that, the reliance is placed upon the provision of Section 3(26) of the General Clause Act, 1897, wherein the expression immovable property shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth.
- Further observed that, as per Section 3 of the Transfer of Property Act, the phrase attached to earth means and includes attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached.
- Further observed that, as per the explanation to Section 17(5)(c) and Section 17(5)(d) of the CGST Act, the term construction includes re-construction, renovation, additions or alterations or repairs to the extent of capitalization to the immovable property.
- Noted that, rotary car parking has been built by the Appellant with the intention to enjoy the benefit of the car parking facility which is fastened to the foundation permanently, until the system ceases to exist or function, and therefore, would not fall within the purview of movable property as the said system becomes part of the existing building.
- Opined that, the installation or commissioning of “Rotary Car Parking System” received by the Applicant would fall within the purview of Section 17(5)(d) of the CGST Act.
- Ruled that, ITC is not admissible on the Rotary Car Parking system.
Our Comments:
The case of Chief Commissioner of Central Goods and Services Tax and Others v. M/s Safari Retreats Private Limited and Others [SLP(C) 26696/2019] which is pending before the Hon’ble Supreme Court, is at its final legs as the Department has filed an appeal against the judgement passed by Hon’ble Orissa High Court in the case of Safari Retreats Private Limited and Others v. Chief Commissioner, Central Goods and Services Tax and Others [W.P. (C) 20463 of 2018 dated April 17, 2019] wherein the Hon’ble High Court allowed the availment of ITC on material input/services used for construction of immovable property which is to be used in the course or furtherance of business i.e. being further let out to various tenant/lessees.
Conclusion:
The Tamil Nadu AAR ruled that the installation and commissioning of the Rotary Car Parking System fall under the ambit of Section 17(5)(d) of the CGST Act, thus making ITC inadmissible. This ruling underscores the importance of understanding the classification of assets under GST law and the implications for ITC eligibility.
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