QUESTION

We are large industry having turnover above Rs 500 Crores and engaged in manufacturing of Steel. Can we avail GST input Credit on the goods or services or both used for
1. Excavation of foundations for Plant &Machinery ?
2. Constructions of Civil foundation for Plant &Machinery ?
3. Site levelling for foundations for Plant &Machinery ?

ANSWER

FACTS OF THE CASE:

Certain expenses were undertaken with regards to excavation of foundations for Plant & Machinery, constructions of civil foundation for Plant & Machinery and site levelling for foundations for Plant & Machinery. To determine whether ITC will be available on these.

LAW APPLICABLE:

1. As per clause (d) to Section 17(5) CGST following credit shall be blocked

"(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"

2. Explanation to Section 17 clarifies that

" For the purposes of this Chapter and Chapter VI, the expression 'plant and machinery' means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes-

(i) land, building or any other civil structures;

(ii) telecommunication towers; and

(iii) pipelines laid outside the factory premises. "

INTERPRETATION:

Section 17(5) CGST which deals with blocking of ITC lays down that ITC on input of goods and services used for construction of an immovable property shall be blocked. However plant and machinery have been excluded from the term "immovable property" meaning that ITC on construction of Plant and Machinery shall not be blocked.
Explanation to section 17 clarifies that plant and machinery includes it's foundation and structural support and therefore the ITC on these shall not be blocked either.

CONCLUSION:

To answer your questions,

Question 1. Excavation of foundations for Plant &Machinery ?
ITC shall be available since excavation is done for foundation which is covered under the definition of 'Plant and Machinery'.

Question 2. Constructions of Civil foundation for Plant &Machinery ?
The word "Civil Foundation" is not clear in your question. If "Civil Foundation" means a structure of land and building wherein workers would reside or operate the machine then ITC shall not be available if the expense is capitalised.
If however "Civil Foundation" means merely a foundation on which the plant and machinery is affixed or supported then ITC shall be available.

Question 3. Site levelling for foundations for Plant &Machinery ?
ITC shall be available since the site levelling is done for the foundation which is covered under the definition of 'Plant and Machinery' (Reply dt. 23/08/2021)