In re Inox Air Products Pvt Ltd (GST AAAR Tamilnadu)
The case concerns the admissibility of Input Tax Credit (ITC) under the GST framework in relation to the transfer of leasehold rights over land used for setting up an industrial facility.
The appellant, a manufacturer and supplier of industrial and medical gases, entered into an agreement with another entity for the transfer of leasehold rights over a portion of land for the remaining lease period of 72 years. The land, along with existing structures, was intended for setting up an Air Separation Plant (ASP) to manufacture gases. A consideration of ₹15 crore was paid for this transfer, and the appellant sought a ruling on whether ITC of GST charged on this transaction would be available.
The Authority for Advance Ruling (AAR) denied ITC, holding that the transaction fell within the restriction under Section 17(5)(d) of the CGST Act, which blocks credit on goods or services used for construction of immovable property (other than plant and machinery). This decision was upheld by the Appellate Authority for Advance Ruling (AAAR).
The appellant challenged this denial, arguing that the conditions for invoking Section 17(5)(d) were not satisfied. It was contended that the leasehold rights were not used for “construction” of immovable property, but merely enabled access to land for business operations. The appellant further argued that the ASP was movable in nature, as it comprised machinery that could be dismantled and relocated. Alternatively, even if considered immovable, the ASP should qualify as “plant and machinery,” thereby falling outside the scope of the ITC restriction.
