ITC – Trace Your Case

IN RE VIJAYNEHA POLYMERS PRIVATE LIMITED (GST AAR TELANGANA)

In Re Vijayneha Polymers Private limited (GST AAR Telangana) 11 December 2021

Whether or not the applicant is entitled to avail input tax credit (ITC) on the GST charged by the contractor supplying the service of works contract to the extent of machine Foundation?

The relevant rule in the case is Section 17(5)(c) of the Central Goods and Services Tax Act, 2017. This section provides that input tax credit (ITC) is available on goods and services used for the construction of a building for the purpose of business or renting to others.

The applicant was a manufacturer of plastic products and it constructed a factory building for which it hired works contractors.
The contractors provided both material and services. The applicant paid GST on the services provided by the contractors.
The applicant filed an application with the Telangana Authority for Advance Ruling (AAR) seeking clarification on whether or not it is entitled to avail input tax credit (ITC) on the GST charged by the contractors to the extent of machine foundation.
The applicant argued that machine foundation is an integral part of a factory building and is used for the purpose of business.
Therefore, it is entitled to avail ITC on the GST charged by the contractors to the extent of machine foundation.
The AAR agreed with the applicant's arguments and held that the applicant is entitled to avail ITC on the GST charged by the contractors to the extent of machine foundation.
The AAR relied on Section 17(5)(c) of the Central Goods and Services Tax Act, 2017, which provides that ITC is available on goods and services used for the construction of a building for the purpose of business or renting to others.
The AAR also noted that machine foundation is an integral part of a factory building and is used for the purpose of business.

The Telangana Authority for Advance Ruling (AAR) held in the case of M/s Vijayneha Polymers Private limited (GST AAR Telangana) that the applicant is entitled to avail input tax credit (ITC) on the GST charged by the contractors to the extent of machine foundation.
The AAR held that machine foundation is an integral part of a factory building and is used for the purpose of business. Therefore, the applicant is entitled to avail ITC on the GST charged by the contractors to the extent of machine foundation.
The AAR relied on the following arguments in support of its ruling:
Section 17(5)(c) of the Central Goods and Services Tax Act, 2017, provides that ITC is available on goods and services used for the construction of a building for the purpose of business or renting to others. Machine foundation is an integral part of a factory building and is used for the purpose of business.
The definition of “plant and machinery” under the GST Act includes foundation and structural support. Therefore, machine foundation is considered to be a part of plant and machinery.
The objective of the GST Act is to simplify and rationalize the tax system. The GST Act allows businesses to claim ITC on goods and services used in the course or furtherance of business. This helps businesses to reduce their overall tax burden and makes them more competitive.

Re: Chowgule Industries Ltd (2019, Mah, AAR):

Whether the input tax credit (ITC) on motor vehicles purchased for demonstration purposes is available ?

The input tax credit (ITC) on motor vehicles purchased for demonstration purposes is available.

Chowgule Industries Ltd is a company that sells motor vehicles.
The company purchases motor vehicles from registered dealers.
The company uses the motor vehicles for demonstration purposes to promote the sale of its products.
The company claimed the input tax credit (ITC) on the motor vehicles purchased for demonstration purposes.
The tax authorities denied the ITC on the motor vehicles, arguing that the motor vehicles were not used for business purposes.
The company appealed to the Authority for Advance Ruling (AAR) in Goa.

The judgement in the case of Chowgule Industries Ltd, 2019 was given by the Authority for Advance Ruling (AAR) in Goa.
The AAR is a quasi-judicial body that is set up under the Goods and Services Tax (GST) Act to provide advance rulings on GST-related matters.
The AAR in Goa held that the input tax credit (ITC) on motor vehicles purchased for demonstration purposes is available.
The AAR reasoned that the use of motor vehicles for demonstration purposes is an essential part of the marketing and sales process of the company.
Therefore, the motor vehicles are used for business purposes and the ITC on these vehicles is available.
The AAR’s decision is significant for businesses that purchase motor vehicles for demonstration purposes.
It clarifies that the ITC on these vehicles is available, which can lead to a significant reduction in the cost of doing business.