The Authority for Advance Rulings, Tamil Nadu in the case of M/S. ARTHANARISAMY SENTHIL MAHARAJ  vide Advance Ruling No. TN/07/ARA/2024 dated 30.04.2024, has ruled that the Rotary Parking System, due to its nature of being permanently fastened to the foundation and its classification as an immovable property, falls under the ambit of Section 17(5)(d) of the CGST Act, 2017. This section states that goods or services received for the construction of immovable property (other than plant or machinery) on one’s own account, even if used in the course of business, are not eligible for ITC. Hence, Input Tax Credit is not admissible under Section 17(5)(d) of the CGST/TNGST Acts, 2017, for the Rotary Parking System intended to be installed by the applicant. 

Facts of the Case:-  The Applicant  is supplying services of Renting of Immovable Property and to enhance the quality of output service provided they are desirous of installing a sophisticated multi-layer car parking system. The applicant submits that the parking facility is highly essential to retain the existing tenants as well as to have full occupancy. 

Issue:- The applicant sought to determine whether they could claim Input Tax Credit (ITC) on a Rotary Parking System intended for installation on their premises to provide parking facilities for tenants and customers.

Contention of the Applicant:-  The applicant argued that since the parking system was detachable and used solely for business purposes, it should be eligible for ITC under relevant sections of the GST Act. They provided invoices detailing the purchase of constituent parts of the parking system, such as Gauge Plates, Bolts, Hex Nuts, Frame Assembly, and pallets with electricals.

AAR Considerations:- The AAR observed as under:

Nature of the Rotary Parking System

• The parking system requires a specific foundation and a steel structure, which are essential for its installation and effective functioning.
• The system is to be built on the applicant's own land with no intention of dismantling or moving it elsewhere, indicating that it is intended for permanent use.

Classification as Movable or Immovable Property

• The Rotary Parking System falls within the meaning of “permanently fastened to anything attached to the earth” as per Section 3(26) of the General Clauses Act, 1897, and “attached to what is so embedded for the permanent beneficial enjoyment of that to which it is attached” under Clause (c) of Section 3 of the Transfer of Property Act, 1882.
• The system is considered immovable property rather than movable, as contested by the applicant.

Eligibility for ITC

• As per the explanation to Section 17(5)(c) and Section 17(5)(d) of the GST Act, the term “construction” includes activities such as reconstruction, renovation, additions, alterations, or repairs to the extent of capitalization to the said immovable property. The Rotary Parking System is deemed an addition to the existing immovable property (commercial building) owned by the applicant.
• The system does not qualify as plant and machinery since it is classified as an addition to the immovable property and is used for providing parking facilities rather than for manufacturing or service provision.

Based on these findings, the AAR ruled that Input Tax Credit was not admissible on the Rotary Parking System under section 17(5)(d) of the CGST/TNGST Acts 2017. In summary, the AAR determined that the Rotary Parking System, despite being detachable, was considered an immovable property and classified as a civil structure, rendering it ineligible for Input Tax Credit under the relevant GST laws.