GST Input Tax Credit not allowable on Inward Supplies for Construction of Warehouse: AAR [Read Order]

The West Bengal Authority for Advance Rulings (AAR) has held that the input tax credit is not allowable for the inward supplies for the construction of Warehouses.

The authority clarified that the warehouse being constructed is a immovable property, not eligible input tax credit as the credit of such tax is blocked under section 17(5)(d) of the GST Act.

The applicant, supplying warehousing services, is constructing a warehouse on leasehold land, using pre-fabricated technology. According to the Applicant, it can be dismantled and reconstructed at a different location. He seeks a ruling on whether the input tax credit is admissible on the inward supplies for construction of the said warehouse.

The applicant relied on the decision of the Uttarakhand AAR in Vindhya Telelinks Ltd wherein relief was granted to the applicant.

Distinguishing the said order from the instant case, the authority observed that “the ld AAR in Uttarakhand has been dealing with mobile towers fixed to a pit with a concrete base. Clearly, the intention is beneficial enjoyment of the mobile tower and not of the concrete base. The mobile tower can, of course, be easily dismantled and fixed elsewhere. The ld AAR has, therefore, treated the mobile tower infrastructure, including the pole, as movable property. In the case of the warehouse, however, the pre-fabricated movable structures do not constitute the property of the warehouse. They are building blocks applied to a civil structure attached to the land to construct a complete warehouse. The warehouse cannot be conceived without the beneficial enjoyment of the civil structure, which is an integral part of the property.”

“The decision in Vindhya Telelinks Ltd (supra) is not, therefore, relevant. In this connection, reference may be made to clause 4(v) of the Circular No. 58/1/2002-CX dated 15/01/2002, where it is concluded that “if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods.” Clearly, the warehouse cannot be relocated by unfixing the pre-fabricated structures alone. The dismantling of the floor, which is the most important component of the warehouse, is not possible without substantial damage to the foundation,” the authority said.

“In the light of the above discussion, it is concluded that the Applicant is constructing a warehouse that is intended to be used as a permanent structure, and associated with beneficial enjoyment of the land on which it is being built. The technology used for the construction of the warehouse involves the application of pre-fabricated structures and also civil work for supporting the pre-fabricated structure and developing the floor of the warehouse. The warehouse cannot be conceived without beneficial enjoyment of the civil structure embedded on earth. The warehouse being constructed is, therefore, an immovable property, and the input tax credit is not admissible on the inward supplies for its construction, as the credit of such tax is blocked under section 17(5) (d) of the GST Act,” it said.