ITC Not Allowable On Construction Of Shed Using Prefabricated Technology: Telangana AAR

The Telangana Authority of Advance Ruling (AAR) has held that input tax credit (ITC) is allowed for the construction of sheds using prefabricated technology.

Sahil Inamdar has observed that the Pre-Fabricated Sheds (PFS) being constructed are, therefore, immovable property, and the input tax credit is not admissible on the inward supplies, which may include works contract services, for its construction, as the credit of such tax comes under the category of blocked credits.

S.V. Kasi Visweswara Rao observed that the warehouse is erected to make use of the space created over the land on which it is built; hence, in view of the law declared by the Supreme Court, the warehouses erected by the applicant using prefabricated structures constitute immovable property and are not eligible for an input tax credit in terms of Section 17(5)(d) of the CGST Act, 2017.

The applicant, M/s. Sanghi Enterprises is constructing a shed on leased land, and the property being constructed is a pre-fabricated shed system. It is fixed by anchor bolts to a low RCC platform embedded in the ground, and it is the only civil structure. The rest of the structure, like columns, beams, rafters, wall sheets, roof sheds, etc., are all joined with one another by nuts and bolts and can be easily dismantled and restructured at another location. The low-rising RCC platform is, of course, permanently embedded in the ground. However, the shed system built thereon can be dismantled, reducing repeated capital expenses in the event of a shift of location.

The issue raised was whether input tax credits are allowed for the construction of sheds using prefabricated technology.

As per Section 17(5)(d) of the CGST Act, goods or services, or both, received by a taxable person for an immovable property shall not be amenable to claiming an input tax credit.

The AAR noted that even a temporary shelter such as a hut is immovable property as long as it is for the beneficial enjoyment of the land to which it is attached. Applying this principle, the doors and shutters, which are generally fixed to the door frame in the wall with screws and nails, are considered immovable property.

The AAR held that Section 17(5)(d) bars any taxpayer from availing of the benefit of input tax credit in cases where the goods or services, or both, received by the said person are used for the construction of an immovable property, even if it is in the course or furtherance of business.

Applicant’s Name: M/s. Sanghi Enterprises

Date: 12.04.2023

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