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IN RE VIJAYNEHA POLYMERS PRIVATE LIMITED (GST AAR TELANGANA)

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

ISSUE:

  • 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?

RULE:

  • 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.

FACTS:

  • 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.

HELD:

  • 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.