ITC of GST paid on procurement of air conditioning cooling system and ventilation system is not allowed.

Facts

• The applicant M/s. Wago (P.) Ltd. is establishing its new factory in Gujarat and is procuring various assets to install them in its factory.
• The air conditioning and cooling system consists of chiller, pumping system, piping with insulation, ducting and insulation work, HVAC related electric work, HVAC BMS and Tool room AC system.

Matter in question

• The applicant wishes to know the admissibility of input tax credit of GST paid on the procurement of air conditioning and cooling system and ventilation system including the service of installation and commissioning the same in terms of the provisions of section 16 and section 17.

Observations and Findings

• All the parts of Air conditioning and cooling system are assembled at the site and fitted on the wall and roof and the floor of the building.
• All the different parts of ‘Air conditioning and cooling system’ after being fitted in the building loses their identity as machines or parts of machines and become a system, namely Air conditioning and cooling system. This AC System is in nature of a system and not machine as a whole. It come into existence only by assembly and connection of various components and parts.
• Further, Air Conditioning system once installed and commissioned in the building is transferred to the building owner and this involves transfer of property. Thus, no merit to treat an entire Central Air conditioning system a movable property.
• All the other different parts of ‘Ventilation system’ after being fitted in the building loses their identity as individual goods and become “Ventilation system”. The ‘Ventilation system’ fitted in the building cannot be taken as such to the market for sale and cannot be shifted from one place to another as such to erect at another site.

Ruling

Input tax credit is not admissible on Air-conditioning and Cooling System and Ventilation System, as this is blocked credit falling under section 17(5)(c) CGST Act.

Nakul Sharma, Audit Associate, SW