ITC not available for GST paid on Input Services of Lease Premium on which GST has been charged: AAR [Read Order]

The Gujarat Authority of Advance Ruling (AAR) held that the Input Tax Credit (ITC) is  not available for GST paid on input services of Lease Premium on which GST has been charged.

The applicant, M/s J M Chemicals submitted that Long Term Lease premium is exempt from tax under Entry 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 11 of the GST Acts only in respect of grant of lease by State Government Industrial Development Corporations or Government entities. The transferee from GIDC herein named as M/s Ginni Filaments intends to charge GST and pay tax under the GST Acts on lease premium to be collected from JM for assignment of lease.

The applicant sought the advance ruling on the issue whether M/s. J.M. Chemicals is eligible to claim Input Tax Credit of GST paid on input services of Lease Premium paid to Ginni Filaments on which they have charged GST under the head miscellaneous receipt under SAC code No. 99979.

The coram of Sanjay Saxena and Arun Richard GST amount borne by M/s J M Chemicals on subject service received is blocked credit vide Section 17(5)(d) CGST Act and thereby ineligible for availment, for the reasons that the expression ‘plant and machinery’ excludes land. As expounded at para 12 of this Ruling, with this expression of Plant and Machinery excluding land, explicitly incorporated in the Blocked Credit section 17(5) CGST Act, We hold that Legislature has expressed its intent that ITC shall not be available in respect of services pertaining to land received by a taxable person for construction of an immovable property including when such services are used in the course or furtherance of business; The word used by the Legislature in Section 17(5)(d) CGST Act is ‘for’ and not ‘used’, thereby the intention of Legislature was to block the credit of subject lease service received by Taxable person for construction of immovable property; and GST Council is seized of the matter that GST borne by a Taxable Person on such leasing is not available for construction of immovable property.

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