The Tamil Nadu Authority of Advance Ruling (AAR) ruled that the INOX is not entitled to utilise Input Tax Credit (ITC) of GST restricted under Section 17(5)(d) of the CGST Act which is charged by IPL.
The applicant, INOX Air Products Pvt Ltd is engaged in the business of manufacture and supply of industrial 86 Medical gases, including oxygen (both Industrial 86 Medical Grade), nitrogen, argon etc (in both liquid and gaseous form).; State Industrial Promotion Corporation of Tamilnadu (hereinafter referred as SIPCOT) had entered into an agreement dated 22.07.1993 with India Pistons Limited(hereinafter referred to as IPL) for lease of an area of land in Hosur for a period of 99 years for the purpose of setting up a piston manufacturing industry.; INOX had approached IPL for transfer of the leasehold rights for the remainder period of 72 years in respect of part of the property for setting up of State-of-the-art medical and industrial gases plant, i.e. Air Separation Unit (ASU) for manufacture and supply of Industrial gases.; INOX and IPL entered into a Memorandum of Understanding for transfer of leasehold rights(MOU). SIPCOT vide Order No. P-II/SICH/II/IPL/146/2012 dated 28.12.2020 had accorded its approval for transfer of leasehold rights to INOX. Accordingly, SIPCOT has amended its original lease agreement vide a modified lease deed in order to lease the part property to INOX. In terms of Clause 2 of MOU, IPL has agreed to transfer the leasehold rights in the part property to INOX for a total consideration of Rs. 15,00,00,000/-.
The applicant has sought the advance ruling on the issue whether the applicant is eligible to avail Input Tax Credit of GST Paid on the supply received by them. The question raised is within the ambit of this authority as per Section 95/97(2) of GST Act and therefore the application is admitted.
The coram of members T.Padmavathi and B.Senthilvelan noted that INOX had paid ‘consideration’ to IPL, for agreeing to partwith their rights in the leasehold held by IPL, on the land required by the applicant. IPL had consented against such consideration and applied for withdrawing the leasehold held by them in favour of the applicant and on approval by SIPCOT, the applicant has entered into a lease agreement with SIPCOT on payment of necessary charges as required and acquired the leasehold rights for the land. Thus, it is evident that the amount paid is towards acquiring their entitlement to take on lease the land required for putting up a State of the art Ultra High Purity Cryogenic Liquid Medical and Industrial Oxygen Plant. The land is acquired in the course of business and by definition ‘business’ under GST (section 2(17) of the Act), includes services in connection with the commencement of business, therefore the transaction is in the course or furtherance of business. The applicant is a registered person and therefore is entitled to avail credit of the supplies received by them in the course or furtherance of business as per Section 16(1) of the Act. The applicant has stated that as the ‘Air Separation Unit(ASU)’ which is put up on the land leased is a ‘Plant and Machinery’, the restriction at Section 17(5)(d) is not applicable in respect of the goods and services used for the construction of such Plant and Machinery.
“The applicant is not entitled to avail and utilize ITC of GST charged by IPL as the same is restricted under Section 17(5)(d) of the CGST/TNGST Act 2017, if such transaction is considered to be a supply,” the AAR observed.
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