The Maharashtra Authority of Advance Ruling (AAR) in its recent ruling has held that Input Tax Credit (ITC) cannot be claimed on the purchase of paver blocks laid on land considering them to be immovable property.
Facts of the case:
- The Applicant, M/s Sundharams Private Limited, is engaged in providing warehousing, storage, and support services to the Original Equipment Manufacturers (OEMs) of the automobile industry, transports cars tractors using its fleet of car carrier vehicles.
- During the course of these services, the cars are stored in the applicant’s stockyard prior to their transit to the respective car dealers. On storage rentals of these vehicles, the applicant Company has been collecting and paying applicable GST.
- The applicant has purchased tax paid Paver Blocks which are laid in the parking area of the land without any attachment to the cart. The object of laying such blocks is to ensure efficient and safe parking of automobiles of OEMs during the contract period. If the cars are placed on the ordinary surface, it will be subject to quicker wear & tear due to the accumulation of water, dust eye, in the wheels of such automobiles.
- Such paver blocks are not to be permanently embedded on earth and are capable of being removed as such without causing damage to them for reuse elsewhere.
- Moreover, the Lease Deed executed by the Company with its landowners contains a clause to the effect that the Company shall remove such Paver Blocks and take possession of the same on the vacation of the premises. Hence such Paver Blocks are to be construed as moveable items.
Question on which Ruling was sought:
Whether the applicant is entitled to avail Input tax credit under CGST in respect of taxes to be paid on its purchase of Paver Blocks laid on the land.
Order of Maharashtra AAR: Deliberations and Ruling
- The impugned car parking system , to be installed on a vacant plot of land , by way of laying of paver blocks , does not result into supply as chattel. In fact , before installation , there can be no goods as such which can be called a ‘parking system’.
- The system requires substantial work of interlocking of paver blocks using support from the boundary walls of the said land to be done at the site to be called a ‘parking system’.
- Once made operational the ‘parking system’ obtains a state of permanency. It is not such as can be easily removed from the existing place and put into a place at some other location. It is also not such that there is an intention to put it into some other place. Further, apart from the goods cannot be re-erected as in the previous place as the requirement of each place is different.
- The paver blocks are meant to be permanently fixed to earth but whenever the need arises the applicant may remove them and reerect. Hence we concluded that the applicant would not use the paver blocks as in the subject case with an intention to remove it and use the same as a movable property.
- We find that the decision of the Supreme Court in the case of Municipal Corporation of Greater Bombay Vs. Indian Oil Corporation Ltd would be applicable in instant case. In said case it was held that the tanks, resting on earth on their own weight without being fixed with nuts and bolts , have permanently been erected without being shifted from place to place and this permanency is the test. Accordingly paver blocks are to be considered as immovable property.
- Provisions of Section 17(5)(d) of the CGST Act,2017 squarely applies in the subject case and thus the applicant cannot avail input tax credit.
- We are of the opinion that since the case of M/s Safari Retreats Pvt Ltd is pending before Supreme Court, the same has not attained finality. Further the High Court in this case held that they are not inclined to hold Sec 17(5)(d) to be ultra vires. Therefore, we are not relying upon the judgment of Hon’ble High Court.
In view of above discussions the Authority comprising of members A.A. Chahure and P. Vinitha Shekhar ruled that the subject viz paver blocks laid on land would qualify as immovable property and therefore Applicant cannot avail ITC in the subject case as per Section 17(5) (d) of the CGST Act, 2017.
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