MINDRILL SYSTEMS AND SOLUTIONS PVT. LTD.

West Bengal AAR rejects the claim of ITC on the construction of a Warehouse, considering this is of a permanent nature and will be capitalized in “books of account.” While delivering the ruling, AAR distinguishes itself from the Orissa High Court’s judgment on Safari Retreat. Safari Retreat is pending before Supreme Court. AAR upheld the restriction on ITC in such case as per Sec. 17(5).

1.1 at the outset, we would like to make it clear that the central goods andservices tax act, 2017 (the cgst act, for short) and the west bengal goodsand services tax act, 2017 (the wbgst act, for short) have the sameprovisions in like matter except for certain provisions. therefore, unless amention is specifically made to such dissimilar provisions, a reference to thecgst act would also mean reference to the corresponding similar provisions inthe wbgst act. further to the earlier, henceforth for the purposes of theseproceedings, the expression ‘gst act’ would mean the cgst act and thewbgst act both. 

1.2 the applicant is stated to be engaged primarily in the business ofmanufacturing of pneumatic rock drills, jack hammers, equipment, spare partsand accessories used in mining/construction industry. 

1.3 the applicant submits that as a part of its business expansion plan, it decidedto construct warehouse / godown at village mollarber, post office-dankunicoal complex, durgapur expressway, p.s. dankuni, hooghly, west bengal-712310, with sole intention to provide the same on rent. accordingly, theapplicant has constructed one warehouse and let it out to “zomato hyperpureprivate limited” and has been paying tax on such supply. 

1.4 the applicant has made this application under sub section (1) of section 97 of the gst act and the rules made there under raising following questions videserial number 14 of the application in form gst ara-01:- (i) whether input tax credit (in brevity “itc”) against inward supply of saidinput/input service used for construction of warehouse can be claimed andutilized to pay tax on the outward supply of services provided by way of rentingof said warehouse in case such construction expenses are capitalized in books? (ii) whether input tax credit (in brevity “itc”) against inward supply of saidinput/input service used for construction of warehouse can be claimed andutilized to pay tax on the outward supply of services provided by way of rentingof said warehouse in case such construction expenses are not capitalized inbooks? 

1.5 the aforesaid question on which the advance ruling is sought for is found tobe covered under clause (d) of sub-section (2) of section 97 of the gst act. 

1.6 the applicant states that the question raised in the application has neitherbeen decided by nor is pending before any authority under any provision of thegst act. 

1.7 the officer concerned from the revenue has raised no objection to theadmission of the application. 

1.8 the application is, therefore, admitted. 

2. submission of the applicant 

2.1 the applicant submits that he has constructed a warehouse / godown atvillage mollarber, post office-dankuni coal complex, durgapur expressway,p.s. dankuni, hooghly, west bengal-712310 with sole intention to provide thesame on rent and earn “rental income” benefits. the applicant accordingly hasconstructed one warehouse and let it out to “zomato hyperpure privatelimited”. 

2.2 the applicant has received following inward supplies amongst others duringthe f.y. 2020-2021 and 2021-2022 to construct the said warehouse:- i. prefabricated steel building ii. structural installation of prefabricated building iii. works contract services like painting, plumbing, structural erection,electrical installation, etc. iv. consultancy service v. cement, marble, paver block, shutter door, electrical equipment, fireprotection system and insulation, etc. 

2.3 the applicant states that inward supplies received for construction of the saidwarehouse has following attributions:- i. inward supplies relating to construction of building (i.e. construction serviceprovided by builders, developers & contractor); ii. inward supplies relating to goods & services, which are directly used forconstruction of building; iii. inward supplies relating to expenses in the form of repairs & maintenance,additions, alterations etc., which are capitalized in the books of account; inward supplies relating to expenses in the form of repairs & maintenance,additions, alterations etc., which are not capitalised in the books of account. theapplicant company had paid igst, cgst and wbgst of rs.4179658.75,rs.2090857.37 and rs.2090857.37 respectively on inward supply of saidinput/input services used for construction of said ware house. 3. submission of the revenue 

3.1 the concerned officer from the revenue has not expressed any view on theissue raised by the applicant. 

4. observations & findings of the authority 

4.1 we have gone through the records of the issue as well as submissions madeby the authorised advocate of the applicant during the course of personalhearing. 

4.2 as seen from the facts of the case, the applicant has constructed a warehouse/ godown and has let it out to “zomato hyperpure private limited”. further,since the activity of letting out the warehouse amounts to supply of servicesunder the gst act, the applicant has been paying tax on such supply. 

4.3 the applicant, to construct the warehouse, has received inward supplies ofgoods and services both including works contract services. the issue invoved inthe instant case is related to admissibility of credit of input tax charged onaforesaid supplies received by the applicant. 

4.4 sub-section (1) of section 16 entitles every registered person to take credit ofinput tax charged on any supply of goods or services or both to him which areused or intended to be used by him in the course or furtherance of his business.on the other hand, clause (c) and clasue (d) of sub-section (5) of section 17 of the gst act restricts input tax credit in respect of works contract services andgoods or services used towards construction of an immovable property to theextent of capitalization, to the said immovable property.

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