2018 (10) TMI 745 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (18) G. S. T. L. 289 (A. A. R. – GST) – Input tax credit – input services – cost of civil works incurred under Extension project – Mechanical Works – Electrical Works – Applicant submits that input tax credit in relation to ‘Mechanical Works’ and ‘Electrical Works should be admissible as such costs pertain to construction of plant and machinery.
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Whether on facts and circumstances of the case, the input tax credit of tax paid on costs proposed to be incurred in relation to Mechanical Works’ and ‘Electrical Works’ under the Extension Project can be treated as ‘admissible under the Central Goods and Services Tax Act, 2017?
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Held that:- Most of the services were held to be admissible. The credit on following services denied: Structural work, external finishing work, internal finishing work, M and E related civil work – M and E related civil works – Plumbing – Gardening water supply system – dismantling work –
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posed to be incurred in relation to activities mentioned in Annexure 4 can be treated as admissible under the Central Goods and Services Tax Act, 2017 ( CGST Act, 2017 )? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act 02. FACTS AND CONTENTION – AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus – STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. 1. Background of operations: 1.1 The Applicant, a private limited company incorporated under the pro
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under the Extension Project can be broadly bifurcated into the following categories: i. Costs for Civil Works; ii. Cost for Mechanical Works; and iii. Costs for Electrical Works 2. Questions before the Authority of Advance Ruling: 2.1 The Applicant has approached the Authority of Advance Ruling to determine the admissibility of input tax credit of tax paid on costs proposed to be incurred in relation to activities mentioned in Annexure 4. 2.2 The Applicant believes that input tax credit in relation to Civil Works should be inadmissible under Section 17 (5) (c) and Section 17 (5) (d) of the CGST Act, 2017, because such costs pertain to construction of an immovable property other than plant and machinery. However, the Applicant submits that input tax credit in relation to Mechanical Works and Electrical Works should be admissible as such costs pertain to construction of plant and machinery. 2.3 The Applicant craves leave to submit such further facts at or before the hearing of the appli
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ceived the goods or services or both; iii. The tax charged in respect of the supply has been paid to the Government; iv. The recipient has furnished statutory GST returns in terms of Section 39 of the CGST Act, 201 7; and v. The payment is made to supplier within 180 days from the date of issue of invoice. 1.3. In addition to the above, there are certain restrictions imposed on availment of input tax credit under Section 17 (5) of the CGST Act, 2017. Relevant extract of the provision is reproduced below for reference: (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (c) 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; (d) goods or services or both received by a taxable person for construction of an immovable p
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on of an immovable property; and ii. goods and/or services received for construction of an immovable property. Therefore, the Applicant does not contest a claim to input tax credit on costs of civil works under the Extension Project. However, the provision also suggests that input tax credit would be available where such works contract services, goods and/or services are received for construction of an immovable property in the nature of plant and machinery. 1.5. Therefore, the present application for advance ruling is being filed to determine the eligibility of input tax credit in relation to costs proposed to be incurred for Mechanical Works and Electrical Works under the Extension Project. Mechanical Works entails activities in the nature of Plumbing work, Fire Protection work, Air Conditioning work, etc. and Electrical Works entails activities in the nature of Sub-station work, DG Set work, Lighting System work, etc. A detailed break-up of activities proposed to be undertaken in th
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or making outward supplies may be of the following 2 types: i. Directly used for making outward supplies i.e. having a direct nexus for making outward supplies; and ii. Indirectly used for making outward supplies i.e. having an indirect but essential nexus for making outward supplies. 1.9 The Applicant would like to submit that costs incurred for Mechanical Works and Electrical Works are indirectly used for making outward supplies i.e. such costs are essential for carrying out operations for making outward supplies and if such costs are not incurred, the operations for making outward supplies would be impacted. For instance, the Air Conditioning work is essential/ indispensable in the manufacturing facility because the products manufactured by the Applicant (medical products) are required to be produced in a sterile environment under controlled temperatures to adhere to minimum quality requirements, failing which the products manufactured will not be suitable for their required medical
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ealer under Section 8 (3) (b) of the Central Sales Tax Act, 1956 ( CST Act ) only if such goods are used in the manufacture of processing of goods. The Supreme Court held that where any particular process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the said process or activity would fall within the expression in the manufacture of goods . They need not be ingredients or commodities used in the processes, nor must they be directly and actually needed for turning out or the creation of goods . Relevant extract of the judgement if reproduced below for your reference: 8. …… ……. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that pr
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l equipment" should fall within the terms of Rule 13, it must be an ingredient to the finished goods to be prepared, or "it must be a commodity which is used in the creation of goods." If, having regard to normal conditions prevalent in the industry, production of the finished goods would be difficult without the use of electrical equipment, the equipment would be regarded as intended for use in the manufacture of goods for sale and such a test, in our judgment, is satisfied by the expression "electricals." 1.12. The Applicant would be happy to furnish any additional information that would be necessary to help ascertain the eligibility of input tax credit. 1.13. Further, the Applicant submits that costs pertaining to Mechanical Works and Electrical Works are intended to be capitalized in the books of accounts under the head plant and machinery 1.14. Basis the above background, in the present case, the Applicant submits that the activities relating to Mechanical
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– AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- In this regard the details asked by Advance Ruling Authority (GST). Mumbai is submitted as under The applicant has provided the details of activities proposed to be undertaken in the nature of Mechanical Works and Electrical Works in form of Annexure -4 to their application. On going through the Annexure-4 submitted by the applicant it appears that the Mechanical Works mainly entails activities in the nature of Plumbing works, Fire Protection Works, Air Conditioning Works and the Electrical Works mainly entails activities in the nature of Sub-station works, DG Set Works, Lighting Systems, etc. Basis the submission made by the applicant it appears that the Mechanical Works and Electrical Works are indirectly associated with the course or furtherance of their business and are essential for carrying out manufacturing process. Therefore, it appears that the ITC in relation to works mentioned at Sr.
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body was present from the side of Jurisdictional Officer but written submissions has been sent by post. The application was admitted and final hearing was held on Ms. Aabha S Lekhak, Advocate alongwith Sh. Nitin Vijaivergia, C.A. Sh. Atul Phakhale Business controller and Sh. Rahul Wangnul, Engineer head appeared and made detailed written submissions in support of their claim for Cenvat Credit. They also orally stated that claims in respect of DMAC yard costs, indirect expenses and design cost may also be allowed to them. No body was present from the side of Jurisdictional Officer, hence his earlier written submission is considered for this issue. 05. OBSERVATIONS We have gone through the facts of the case and various written submissions made by the applicant and jurisdictional officer during the course of the proceeding before us. 1. We find that the Applicant, is a private limited company incorporated under the provisions of the Companies Act, 1956 holding GST registration number ( G
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the following categories: i. Costs for Civil Works; ii. Cost for Mechanical Works; and iii. Costs for Electrical Works. The Applicant does not contest a claim to input tax credit on costs of civil works under the Extension Project. However, the provision u/s 17[5] (c) and 17(5) (d) Of CGST ACT also suggests that input tax credit would be available where such works contract services, goods and/or services are received for construction of an immovable property in the nature of plant and machinery. 4. Therefore, the present application for advance ruling is being filed to determine the eligibility of ITC in relation to costs proposed to be incurred for Mechanical Works and Electrical Works under the Extension Project. Mechanical Works entails activities in the nature of Plumbing Works, Fire Protection Work, Air-Conditioning Works, etc and Electrical Works entails activities in the nature of Sub station Work, D G Set Work, Lighting System Work, etc., A detailed break up of activities prop
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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 and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by
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hereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. 17. (1) Where the goods or services or both are used by the registered person
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ny, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse: Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year: Provided further that the restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number. (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such ve
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tward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession; (c) 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; (d) 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. Explanation.-For the purposes of clauses (c) and (d), the expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; (e) goods or services or both on which tax has been paid under section 10; (f) goods or services or both rec
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ions and restrictions as may be prescribed would be entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in course or furtherance of business. Thus the goods are used or intended to be used in course or furtherance of business. Further we find that conditions for taking input tax credit have been given in Section 16 which are as under:- (a) The person has to be in possession of tax invoices, debit note or other prescribed tax paying documents. (b) Has received goods or services or both. (c) The tax charged in respect of such supply is actually paid. (d) He has furnished return under Section 39. (e) Where depreciation on tax component of cost of capital goods and plant and machinery is availed, the ITC on such tax component would not be allowed. (f) Would not be allowed to take credit after due dates as prescribed. We find that apart from conditions as laid down under Section 16 of the GST Act, Section 17 provid
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e Ruling Authority with respect to eligibility of ITC in respect of relevant portion of work is added to the submissions and claims as made by them. same is as under:- 06 In view of the deliberations as held hereinabove, we pass the order as under : ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-33/2018-19/B-41 Mumbai, dt. 28.05.2018 For reasons as discussed in the body of the order, the question is answered thus – Question :- Whether on facts and circumstances of the case, the input tax credit of tax paid on costs proposed to be incurred in relation to activities mentioned in Annexure 4 can be treated as admissible under the Central Goods and Services Tax Act, 2017 CCGST Act, 2017 )? Answer :-As per details in relevant column of the Table under main heading views and decisions of members of the Advance Ruling Authority. – Case laws – Decisions – Judgements – Orders – Tax Management India – taxm
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