The Telangana Authority for Advance Rulings in the case of M/s Sanghi Enterprises vide order dated 12.04.2023, held that construction of Pre-fabricated sheds (PFS) to be considered as ‘immovable property’ and hence the input tax credit on the inward supplies is not admissible under category of blocked credits as per section 17(5)(c) and 17(5)(d) of the CGST Act, 2017.

In this case, the applicant is engaged in construction of PFS. They procure goods and services from various contractors for fitting out the PFS. It is submitted that the ‘PFS’ can be detached and reused, and are not considered to be permanent civil affects. The ‘PFS’ are pre-fabricated structures that are erected at the site by way of joining to bolts. The foundation is made of concrete and it rests on the earth, and is the only part in ‘PFS’ which is embedded in the earth, for permanent beneficial enjoyment.

The applicant sought advance ruling with regard to the availability of Input Tax Credit against the procurements pertaining to construction of ‘PFS’.

The AAR stated that the contention of the applicant that the very reason why ‘PFS’ is preferred over conventional building is that it offers movability doesn’t make him eligible for This is because when a ‘PFS’ is assembled in a place the intention is definitely not to make it a movable structure but rather to conduct the business permanently beneath it i.e. on the RCC platform to which it is attached. ‘PFS’ has more flexibility than the conventional structures in facilitating hassle-free shifting based on changing business requirements but that doesn’t make it a movable structure as the intention of establishing shed or ‘PFS’ is to continue business permanently on the RCC platform to which it is attached. availing ITC as per Section 17(5) of the CGST/TGST Act’ 2017.

Further, the pre-fabricated movable components joined to make a structure do not constitute as separate property of the ‘PFS’. They are building blocks applied to a civil structure attached to the land to construct a complete ‘PFS’. They have no separate existence from the ‘PFS’. The ‘PFS’ cannot be conceived without the beneficial enjoyment of the civil structure, which is an integral part of the property.

The AAR held that ‘PFS’ being constructed is classified as an “immovable property” and credit is not admissible on inward supplies which include pre-fabricated movable components and also on inward Works contract services pertaining to ‘PFS’ technology as per section 17(5)(c) and section 17(5)(d) of CGST/TGST Act’ 2017.