Admissibility of Input Tax Credit on Goods and
Services for Tailing Dam Construction under GST
By Yogesh Verma (CS/LLB) / 2 min read / GST Advance Ruling
Name of the
Party: M/s Hindustan Zinc
Limited
Name of the
Ruling Authority:
Rajasthan Authority for Advance Ruling, GST
Ruling No.: RAJ/AAR/2024-25/24
Date of
Ruling: 03.01.2025
Summary of
Ruling:
- The applicant sought an advance
ruling on the availability of Input Tax Credit (ITC) on goods and services
used for increasing the height of the tailing dam under Sections 17(5)(c)
and 17(5)(d) of the CGST Act, 2017.
- The authority ruled that the tailing
dam qualifies as an immovable property and does not fall under
"Plant and Machinery," making ITC ineligible for such expenses.
Facts of
Advance Ruling:
- Hindustan Zinc Ltd. (HZL) is engaged
in mining and processing of metals such as zinc, lead, and silver.
- The process generates hazardous waste
(tailings), which must be disposed of in a legally compliant manner.
- HZL constructs and raises the height
of tailing dams to manage this waste, using materials like rocks, mud,
sand, and HDPE sheets.
- They capitalized these expenses and
claimed ITC, arguing that the dam is an integral part of the milling plant
and qualifies as "Plant and Machinery."
Question
Raised:
- Whether ITC is available on goods and
services used for increasing the height of the Tailing Dam under Sections
17(5)(c) and 17(5)(d) of the CGST Act, 2017?
Submission
Made by Applicant:
- The tailing dam is an integral
part of the milling plant, essential for mining operations.
- It should be classified as
"Plant and Machinery," making ITC eligible.
- Without the dam, mining activities
cannot continue, and environmental laws mandate its maintenance.
- The dam consists of automated
pipelines, drainage systems, and geomembranes, making it an
"apparatus" rather than a civil structure.
- Several legal precedents were cited
to justify the ITC claim.
Relevant
Sections:
- Section 17(5)(c) and (d)
of the CGST Act, 2017, which restrict ITC for construction of immovable
property unless classified as "Plant and Machinery."
- Mines and Minerals (Development and
Regulation) Act, 1957, which mandates safe disposal
of tailings.
Discussion
and Finding of Ruling Authority:
- The authority determined that the tailing
dam is an immovable property and does not qualify as "Plant and
Machinery."
- The materials used, such as cement
and HDPE sheets, contribute to its classification as a civil structure.
- The authority rejected the reliance
on functionality test and previous judgments, stating that the dam
serves an environmental compliance role rather than a direct business
function.
- The recent Supreme Court judgment in Safari
Retreats Pvt. Ltd. was reviewed but was not found applicable in this
case.
Final
Ruling and Conclusion:
The Rajasthan
Authority for Advance Ruling concluded that ITC is not available for
goods and services used in increasing the height of the tailing dam, as it
falls under immovable property under Section 17(5)(c) and 17(5)(d) of
the CGST Act, 2017.
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.
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