Whether ITC is
available on Inputs to the assessee when the Godowns construted by him is
entirely meant for renting it out for Commercial purposes to registered dealers
AUTHORITY FOR ADVANCE RULING,
TAIL NADU
Advance Ruling No. 123/AAR/2023 Date: 19-12-2023
M/s. Suswani Foundations Private Limited
1.
Relevant Sections/Rules & Notification/Circulars on the
Subject:
·
Section 16 of The CGST Act
·
Section 17(5) of The CGST Act
2.
Facts and contentions submitted by applicant:
·
Suswani Foundations Private Limited, No. 125 —
90 and 90/1, Sydenhams Road, Choolai, Chennai 600003(hereinafter referred to as
the `Applicant') are registered under the GST Acts with GSTIN: 33AAVFK6262D1Z6.
·
The Assessee is constructing around 1.62 Lakhs
square feet of industrial building to be rented out as Godowns for commercial
purpose, at evalurkuppam Village, Sriperumbudur Taluk, Kancheepuram District
·
In the instant case, the Applicant has himself built
the godowns for which he has received various goods such as steel, cement etc.
and inputs and services by architects etc. as input services. The Applicant is
proposing to rent out the godowns to various customers which is furtherance of
his business.
·
The Applicant, on interpretation of
law, submitted that, Where the inputs are
consumed in the construction of an immovable property which is meant and
intended to be for the provision of taxable output services, they should be
allowed to avail the Input Tax Credit(ITC).
·
Article 14 of the Constitution of
India reads as under: "The State shall not deny to any person equality
before the law or the equal protection of the laws within the territory of
India." The said Article is clearly in two parts --`equality before law'
prohibits discrimination. It is a negative concept. The concept of `equal
protection of the laws' requires the State to give special treatment to persons
in different situation in order to establish equality amongst all. It is
positive in character. Therefore, the necessary corollary to this would be that
equals would be treated equally, whilst un-equals would have to be treated
unequally.
3.
Questions raised before AAR:
·
Whether ITC is available on Inputs to the
Assessee when the Godowns constructed by him is entirely meant for renting it
out for Commercial purposes to registered dealers
4.
Discussion &Ruling by AAR:
·
Their main defence in the case is
that Section 17(5)(d) of the CGST Act, 2017 is not applicable to them as they
are not constructing the godowns for furtherance of business, but the building
itself is the source of income for them, without which their business does not
exist.
·
Section 17(5)(d) reads as follows:
“(5) Notwithstanding anything contained in sub-section (1) of section 16
and sub-section (1) of section 18, input tax credit shall not be available in
respect of the following, namely:-
(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;”
·
Section 17(5) (d) provides that no
ITC is available in respect of any goods or services received by a taxable
person for construction of an immovable property on his own account even if
such inputs and input services are used in the course and furtherance of
business. In the instant case the applicant has himself built the godown for
which he has received various goods such as cement, steel, sand, PEB, Sheet,
Briks, blue metals etc. as inputs and services by architect, consultancy etc.
as input services. The applicant is proposing to rent out to large companies
for storing their stock for future sale i.e. for furtherance of his business.
Therefore, as per section 17(5)(d), no ITC is available on any goods or
services received by them for such construction and the same cannot be denied
by them.
·
The applicant has contended that
based on Article 14 of Constitution of India, the applicant is required to pay GST on the
rental income arising out of the investment on which he had paid GST, it is
required to have the ITC on the GST paid. They argued that the concept of “equal
protection of the law” under the said Article, requires the State to give
special treatment to person in different situation in order to establish equality
amongst all and therefore, the necessary corollary to this would be that equals
would be treated equally, whilst un-equals would have to be treated unequally. We
do not agree with the contentions of the applicant. The legislative scheme is
amply clear. The input tax paid on the goods / services received for
construction of an immovable property’ on ones own account is unavailable. The
restriction is provided in the Act which is passed by the legislature. The
power to restrict flow of credit exists under Section 16(1) of the GST Act,
which shows a Legislative intent that Input Tax Credit may not always be
allowed partially or fully. As the suitability and requirement of tax payer
varies from person to person , rule/act, cannot be changed/amended accordingly
and it is mandatory for the tax payer to adhere the restriction prescribed in
Act and Rule.
5.
Ruling by AAAR:
·
No Input Tax Credit is available on
Inputs to the applicant when the Godowns constructed by him is meant for
renting it out for Commercial purposes to registered dealers.
Disclaimer: All the Information is based on the
notification, circular and order issued by the Govt. authority and
judgement delivered by the court or the authority information is strictly for
educational purposes and on the basis of our best
understanding of laws & not binding on anyone.
