Goods and Services Used for Laying Transfer Pipelines Outside FactoryAllowability of ITCD. Ramachandra Rao

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The Tax Publishers GST--Input Tax Credit Goods and Services Used for Laying Transfer Pipelines Outside Factory--Allowability of ITC D. Ramachandra Rao The learned author seeks to examine a question whether input tax credit is allowable on the goods and services used for laying transfer pipeline outside factory. The discussion is based on the relevant statutory provisions and an AAAR Tamilnadu ruling in the case of SHV Energy (P.) Ltd., pronounced on 7-3-2022. 1. Allowability of ITC under GST law Section 16 of the Central Goods and Services Tax Act, 2017 (in short "the CGST Act") deals with provisions relating to eligibility and conditions for taking input tax credit. As per sub-section (1) of section 16 of the CGST Act, every registered person shall be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. The taking of input tax credit is subject to the conditions specified under sub-section (2) of section 16. Section 17 of the CGST Act deals with apportionment of credit and blocked credit. Sub-section (5) of section 17 contains the list of goods and services not eligible for input tax credit. As per section 17(5)(c) of the CGST Act, no input tax credit is allowable in respect of works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service Also, as per section 17(5)(d) of the CGST Act, no input tax credit is allowable in respect of goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. It is clear from the above provisions that input tax credit in respect of works contract services and construction service is allowable only when these services are used for erection and commissioning of 'plant and machinery'. As per Explanation appended to section 17, the the expression "plant and machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes-- (i) land, building or any other civil structures; SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Input Tax Credit

Goods and Services Used for Laying Transfer Pipelines Outside Factory--Allowability of ITC

D. Ramachandra Rao

The learned author seeks to examine a question whether input tax credit is allowable on the goods and services used for laying transfer pipeline outside factory. The discussion is based on the relevant statutory provisions and an AAAR Tamilnadu ruling in the case of SHV Energy (P.) Ltd., pronounced on 7-3-2022.

1. Allowability of ITC under GST law

Section 16 of the Central Goods and Services Tax Act, 2017 (in short "the CGST Act") deals with provisions relating to eligibility and conditions for taking input tax credit. As per sub-section (1) of section 16 of the CGST Act, every registered person shall be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. The taking of input tax credit is subject to the conditions specified under sub-section (2) of section 16.

Section 17 of the CGST Act deals with apportionment of credit and blocked credit. Sub-section (5) of section 17 contains the list of goods and services not eligible for input tax credit.

As per section 17(5)(c) of the CGST Act, no input tax credit is allowable in respect of works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service

Also, as per section 17(5)(d) of the CGST Act, no input tax credit is allowable in respect of goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

It is clear from the above provisions that input tax credit in respect of works contract services and construction service is allowable only when these services are used for erection and commissioning of 'plant and machinery'.

As per Explanation appended to section 17, the the expression "plant and machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes--

(i) land, building or any other civil structures;