ITC is eligible on inputs used for construction of foundation of machinery

The Rajasthan Authority for Advance Rulings (AAR), in the case of M/s Uvee Glass Private Limited [Advance Ruling No: RAJ/AAR/2023-24/05, dated June 30, 2023], ruled that Input Tax Credit (ITC) of GST paid on inward supplies used for fixing plant and machinery to the earth by way of foundation or structural support is allowed. This decision applies when the plant and machinery are utilized for making outward supplies of taxable goods.

This ruling clarifies that ITC can be claimed on capital goods like plant and machinery that are permanently fixed, provided they are used for taxable supplies.

Facts:

In the case of M/s Uvee Glass Private Limited, the applicant, who is registered under the GST law and plans to manufacture different types of glass, sought clarification on whether Input Tax Credit (ITC) is available on GST paid for the inward supply of structural support for plant and machinery used in their manufacturing process.

The applicant argued that structural support is essential for running the machinery required for manufacturing glass. They submitted that ITC should be allowed on the GST paid for this structural support because, according to Section 16(1) and the explanation to Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (CGST Act), ITC is permissible when the inward supply of goods or services is used for making outward taxable supplies.

The applicant emphasized that the structural support is integral to the manufacturing process, and the credit should be admissible, as it forms part of the plant and machinery necessary for producing the goods.

Issue:

Whether ITC is eligible on the GST paid on the inward supply of structural support of the plant and machinery that is used for making outward supply of the goods/services?

Held:

The AAR, Rajasthan, in Advance Ruling No: RAJ/AAR/2023-24/05 held as under:

• Observed that, the eligibility and conditions for taking ITC under GST has been mentioned in Section 16 and 17 of the CGST Act.
• Noted that, ITC is available in respect of goods and services or both received by a taxable person for construction of “Plant and machinery” on his own account including when such goods and services or both used in the course of furtherance of business.
• Further noted that, the expression “Plant and machinery” has been defined under explanation which 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 support.
• Held that, ITC of GST paid on the inward supply of structural support of plant and machinery which is used for making outward supply of goods/ services is eligible to the extent of provisions/ conditions laid down in Section 16 and 17 of the CGST Act.