In Advance Ruling/SGST&CGST/2022/AR/57 -AAR- AAR (Gujarat) denies Input Tax Credit on structure/shed erected on the side of sand mill and spray dryer and also on foundation made to install effluent treatment plant
Members Milind Kavatkar (SGST) & Amit Kumar Mishra (CGST) [12-05-2023]

Read Order: In Re: v. Colourband Dyestuff P Ltd

Chahat Varma

New Delhi, June 8, 2023: The Gujarat bench of the Authority for Advance Rulings has ruled that Input Tax Credit (ITC) was not eligible for the structure/shed that was erected on the left side of the Sand mill and spray dryer. The ITC for the structure/shed, including its roof and supports, was also not eligible. Additionally, the ITC for the foundation and support structure of the ETP (effluent treatment plant) and transformer was blocked as per Section 17(5) of the Central Goods and Services Tax Act, 2017.

The applicant, Colourband Dyestuff Pvt. Ltd., was involved in the manufacturing of dyes. They procured intermediate raw materials in a crude form and processed them chemically using Hot Air Generation (HAG) machinery. This process converted the liquid raw material into a powdered form, which was the finished product known as dyes.In order to manufacture dyes, the applicant required several plant and machinery, primary being Sand Mill, spray dryer, and HAG machine. These machines need to be fixed on earth by foundation or various structural supports which were of MS steel/foundation structure. The applicant approached the authority seeking a ruling on the eligibility of Input Tax Credit (ITC) on works contract services and materials procured and utilized towards foundation for setting up of the following machineries, namely, Sand Mill, spray dryer, HAG plant, ETP (Effluent Treatment Plant) with tank farm and fire tank, and DG set.

The Authority observed that the photograph revealed a structure/shed, erected on the left side of the Sand mill and spray dryer and held that this structure/shed would clearly fall within the ambit of civil structure and stands excluded from the expression 'plant and machinery'. Therefore, Input Tax Credit (ITC) for this structure/shed was blocked under Section 17(5) of the CGST Act, 2017.

The Authority further observed that the photograph clearly depicted that there was a roof overhead the machine. It was held that this roof and its supports would clearly fall within the ambit of civil structure and stands excluded from the expression 'plant and machinery'. Hence, the ITC in respect of this structure/shed [i.e., roof and its supports] was blocked in terms of section 17(5) of the CGST, 2017.

The Authority further held that it has been determined that the ETP (effluent treatment plant) was considered a civil structure. Therefore, the applicant was not eligible for ITC in respect of the foundation made to install the ETP.

The Authority further remarked that the appellant was not eligible to claim credit for the taxes paid on the procurement of the Water Treatment Plant, Sewage Treatment Plant, DG Set, and Transformer. This was because civil structures, were specifically excluded from the definition of 'plant and machinery'.