In re GACL-NALCO Alkalies & Chemicals Private Limited (GST AAAR Gujarat)
The Gujarat Appellate Authority for Advance Ruling (AAAR) upheld the rejection of Input Tax Credit (ITC) claims made by GACL-NALCO Alkalies & Chemicals Pvt. Ltd. The case revolved around ITC eligibility on services utilized for constructing a caustic soda plant on leasehold land. The appellant argued that the plant qualifies as “plant or machinery” and falls outside the restrictions of Section 17(5)(d) of the CGST Act, which blocks ITC for construction of immovable property. However, the AAAR relied on the Supreme Court’s ruling in the Safari Retreats Pvt. Ltd. case, emphasizing the functionality test for determining whether a building qualifies as a plant.
The Supreme Court had clarified that a building designed to meet specific technical needs could be treated as a plant and thus qualify for ITC, provided other CGST conditions were met. However, it also stated that ITC would be disallowed if the construction was for the taxpayer’s own use or business premises setup, as it breaks the tax credit chain. Applying this rationale, the AAAR found that GACL-NALCO’s construction was for its own account, making it ineligible for ITC.
The AAAR further examined the appellant’s claim regarding land usage, arguing that payments made to acquire leasehold land rights should qualify for ITC under Section 16 of the CGST Act. The AAAR rejected this contention, holding that ITC for land-related expenses does not apply when the construction results in immovable property. Additionally, the appellant’s reliance on prior judgments to reinterpret the statute did not hold, as the Supreme Court’s guidance in Safari Retreats provided a comprehensive interpretation of Section 17(5)(d).
