In a recent development that has left the construction industry buzzing with discussion,
authorities have issued a definitive ruling on the eligibility of Input Tax Credit (ITC) for various
expenses related to the construction of a new administrative office. The verdict untangles the
web of tax credit complexities, shedding light on what’s claimable and what’s blocked in the
world of construction.
Here’s a swift recap of the crucial takeaways:
Central Air Conditioning Plant: Goodbye, ITC on central air conditioning plants! This ruling has
slammed the door shut on claiming credit for this item. When a works contract service is
involved in its installation, it transmutes into an immovable property. This categorization shift is
a deal-breaker for ITC eligibility under Section 17(5)(c) of the CGST Act, 2017.
Lift/Elevator: The elevator that takes you up might bring your spirits down when it comes to ITC.
Just like the central air conditioning plant, elevators also fall into the ‘works contract service’
category. And when they’re hoisted and installed as part of a construction project, they
integrate with the building and wave goodbye to ITC eligibility.
Electrical Fittings: Think twice before trying to claim ITC for electrical fittings. These concealed
components become part of the building structure when installed through works contract
services. Consequently, they slide into the immovable property category, making ITC
unattainable.
Roof Solar Plant: The solar spotlight is shining favourably on roof solar plants. As long as they’re
not permanently anchored to the building, they retain their identity as plant and machinery.
So, ITC for roof solar plants is still in the cards.
Fire Safety Extinguishers: Fire safety extinguishers, meant to be a permanent feature, meet the
same fate as the others. After their installation, they become part of the building structure,
falling into the immovable property realm. This means waving goodbye to ITC.
Architect Service Fees and Interior Designer Fees: Architecture and design services, while
pivotal for your construction project, are intrinsically linked to the creation of an immovable
property. As per accounting standards, these fees should be capitalized, rendering ITC claims
on architect service fees and interior designer fees null and void.
This ruling reaffirms the intricate nature of ITC eligibility when construction services are received
by recipient. Certain items and services, when incorporated into an immovable property, are
disqualified from credit claims.
This verdict serves as a reminder that the world of taxation is ever-evolving, and staying
informed is key to avoiding unexpected financial setbacks.
| SW Point of View: From a legal perspective, this ruling emphasizes the importance of a clear understanding of ITC rules in construction services received by a taxpayer, enabling businesses to navigate taxation complexities and make informed financial decisions for their projects and distinguishes between items and services that become immovable property, making them ineligible for ITC, and those that remain as plant and machinery, allowing for credit. |
Source: 2023 (10) TMI 473 – APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT
