In a recent Advance Ruling sought by M/s Vijayneha Polymers Private Limited, reported in [2021] 133 223 (AAR – TELANGANA), the Applicant hired works contractors for executing the construction services which includes foundation of machinery, rooms for chillers, boilers, generators and transformers, erecting of electrical poles, laying of internal roads, factory building, internal drainage, laboratory etc.

The Applicant sought an Advance ruling from AAR, Telangana as to whether the ITC on GST charged by the contractor supplying service of works contract is admissible to the Applicant.

AAR, Telangana, after taking due cognizance of blocked credits under Section 17(5) of CGST Act, 2017, more particularly clauses (c) & (d) of Section 17(5) ibid. along with definition of ‘plant & machinery’, observed that –

  1. ITC cannot be availed on works contract services for construction of an immovable property except for erection of plant & machinery;
  2. ITC can be availed on plant & machinery as defined in the Act; which means plant & machinery and machine foundation are eligible for ITC;
  3. Plant & machinery will not include building or other civil structures and pipelines laid outside factory premises; and,
  4. ITC cannot be availed by the registered person on goods or services or both received by the registered person on his own account for the construction of immovable property.

Based on above observations, AAR, Telangana ruled that Applicant is eligible for ITC to the extent of machine foundation only.

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