AAR: ITC can be availed on GST charged by Contractor Supplying Service of Works Contract to extent of Machine Foundation

AAR: ITC can be availed on GST charged by Contractor Supplying Service of Works Contract to extent of Machine Foundation

The Telangana Authority of Advance Ruling (AAR) ruled that to the extent of machine foundation, ITC can be availed on GST charged by contractor for supplying service of works contract.

The applicant M/s. Vijayaneha Polymers Pvt Ltd., has constructed a factory building. They have hired works contractors for executing the construction in different ways like where the applicant provided material and contractor provided construction services and where provided both material and services.

Such construction included foundation of machinery, rooms for chillers, boilers, generators and transformers, erecting of electrical poles, laying of internal roads, factory building, internal drainage, laboratory and so on. The applicant is eager to get clarification based on the eligibility of ITC on the charged amounts by the contractor for these services.

The applicant has pursued the advance ruling on the availability issue of ITC on GST charged by the contractor supplying service of works contract.

The coram of Raghu Kiran and S.V. Kasi Visweswara Rao ruled that ITC cannot be availed on works contract services for construction of a steady property except formation of plant & machinery.

As defined in the explanation to Section 17, ITC can be availed on plant & machinery like apparatus, equipment & machinery fixed to earth by foundation or structural support. It means plant & machinery and machine foundation are eligible for ITC.

Plant & machinery will not include building or other civil structures and pipelines laid outside the factory grounds. ITC cannot be availed on goods or services or both received by a taxpayer on his own account for construction of fixed property. Hence, the AAR ruled that the applicant is eligible for ITC to the extent of machine foundation only.