Eligibility of Input Tax Credit (ITC) on Fire-Fighting System
and Public Health Equipment for Factory Expansion
(Advance Ruling No.: 31/ARA/2025
/ Date of Ruling: 18 August 2025 / Authority For Advance Ruling, TAMIL
NADU / Name of Applicant: M/s. Shibaura Machine India Private Limited)
Summary of
the Advance Ruling
The applicant sought a
ruling on whether Input Tax Credit (ITC) is admissible on the Fire-Fighting
System (FFS) and Public Health Equipment (PHE) installed as part of
the factory expansion project for manufacturing activities.
Additionally, the applicant requested clarity on the timeline for availing
ITC on invoices related to “advance components” billed by the supplier.
After examining the
submissions, contract details, and relevant provisions, the Tamil Nadu
Authority for Advance Ruling held that:
- The installation of the Fire-Fighting
System and PHE forms part of immovable property, and
- The supply constitutes a Works
Contract, thus attracting Section 17(5)(c) and (d) of the CGST
Act, 2017.
Accordingly, the
Authority ruled that ITC is not admissible, and the second question
regarding ITC timing was deemed not applicable.
Questions
Raised in the Ruling
1. Whether
Input Tax Credit (ITC) is eligible on Fire-Fighting System and Public Health
Equipment for expansion of factory for manufacturing activity?
2. What
should be the basis to determine the timeline to avail ITC on the tax invoice
raised by the supplier to bill “Advance Component” of the contract?
Relevant
Legal Provisions
- Section 16(1)
– Eligibility and conditions for taking ITC
- Section 17(5)(c) and (d)
– Blocked credits for works contracts and immovable property
- Explanation to Section 17
– Definition of “Plant and Machinery”
- Section 2(119)
– Works Contract definition
- Section 2(30)
– Composite Supply definition
- Schedule II, Para 6(a)
– Works Contract as supply of services
Facts and
Submissions by the Applicant
- The applicant manufactures injection
moulding machinery and undertook a project for expanding its
manufacturing facility.
- The total contract value for
construction and installation was ₹90.45 crore (exclusive of GST),
awarded to M/s. SMCC Construction India Ltd.
- The contract was divided into four
major components:
- Civil Works
– ₹49.30 crore
- Pre-Engineered Building (PEB)
– ₹27.29 crore
- Fire-Fighting System (FFS)
– ₹4.65 crore
- Public Health Engineering (PHE)
– ₹1.74 crore
- The applicant argued that the FFS
and PHE systems consist of apparatus and equipment (hydrant
systems, pumps, sprinklers, fire alarms, sewage systems, etc.) which are not
embedded in earth, hence movable.
- They classified these under Plant
and Machinery and not as part of the building structure.
- They relied on:
- M/s. Nipro India Corporation Pvt.
Ltd. (AAR Maharashtra, 2018) – ITC allowed on
fire alarm and public address systems.
- Delhi High Court in CIT v. Hindustan
Times Ltd. (2000) – Fire-fighting equipment
treated as plant and machinery.
- The applicant also submitted that Factory
Act, 1948 (Sections 38 and 46) mandates fire safety and public health
installations, reinforcing that such equipment are essential for factory
operations.
- Regarding advance payment invoices,
the applicant contended that ITC can be claimed once the goods/services
are received, even if the supply concludes after the due date under Section
16(4).
Discussion
and Findings by the Authority
1. Nature of Supply
- The contract covers Supply,
Installation, Testing, and Commissioning of FFS and PHE systems — a composite
works contract involving both goods and services.
- The deliverable is defined as “Permanent
Work” in the contract, signifying an immovable nature.
2. Whether Immovable or
Movable Property
- FFS and PHE systems, once installed,
are permanently fastened to walls, floors, or ceilings.
- As per Section 3(26) of the
General Clauses Act, 1897, such installations qualify as immovable
property.
- The Authority noted that these
systems are integrated into the factory building, losing their
independent character after installation.
3. Applicability of
Section 17(5)
- Both Section 17(5)(c) and (d)
block ITC for works contracts and for goods/services used in the construction
of immovable property.
- The Authority concluded that the
fire-fighting and sanitary systems form part of immovable property
and are thus ineligible for ITC.
4. Whether Equipment
Qualifies as “Plant and Machinery”
- The term “plant and machinery”
applies only to equipment used directly for making outward supply of
goods or services.
- The FFS and PHE systems support
factory operations (safety, sanitation) but do not directly participate
in the manufacturing process.
- Hence, they do not qualify as
plant and machinery under the statutory definition.
5. Case Law References
- The Authority found that earlier
rulings such as Nipro India Pvt. Ltd. (allowing ITC) were distinguishable.
- It relied instead on:
- Embassy Industrial Parks Pvt. Ltd.
(KAR AAR 109/2019) – Fixtures like fire systems
form part of building infrastructure and are immovable.
- Varachha Co-operative Bank Ltd.
(Gujarat AAAR, 2023) – Fire extinguishers
permanently fixed to a building are immovable; ITC blocked.
6. Second Question –
Timeline for ITC
- Since ITC on the main contract is not
admissible, the question on timing of ITC availment on advance
invoices was declared infructuous.
Ruling /
Decision
1. Eligibility
of ITC: Input Tax Credit on Fire-Fighting System and
Public Health Equipment installed for factory expansion is not
admissible, being blocked under Sections 17(5)(c) and (d) of the
CGST/TNGST Acts, 2017.
2. Timeline
for Availing ITC: Since ITC itself is ineligible, the timeline
question does not arise.
Conclusion
The Authority for Advance
Ruling, Tamil Nadu, concluded that:
- Fire-fighting and public health
installations constitute immovable property,
and
- The related works qualify as “Works
Contract Services”, which are ineligible for ITC under Section
17(5).
The AAR reaffirmed that only machinery or equipment directly involved
in the manufacturing or outward supply process qualifies as “plant and
machinery” eligible for ITC.
Accordingly, M/s.
Shibaura Machine India Pvt. Ltd. was denied ITC on these
installations, and its query on ITC timing was rendered redundant.
Disclaimer: All the Information is based on the notification, circular advisory 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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