Page 152 - GSTL_27th August 2020_Vol 39_Part 4

478 GST LAW TIMES [ Vol. 39
machinery as Section 17(5)(c) and (d) exclude plant and machinery from immov-
able property. Since, plant and machinery are excluded from immovable proper-
ty, construction and other activity in relation to plant and machinery shall be eli-
gible for Input Tax Credit unless otherwise restricted. The restriction of ITC is
only on the telecom towers, pipelines which are not treated as plant and machin-
ery by virtue of explanation to Sec. 17(5)(c) and (d).
7.1 As already discussed in the preceding paras, Input Tax Credit pro-
visions restrict ITC credit of works contract services for works to be performed
on immovable property and also restrict the credit of construction, related activi-
ty of immovable property even when construction activity do not fall into the
scope of works contract. However, works contract and construction activity is
eligible for Input Tax Credit if done in respect of plant and machinery.
7.2 Thus, Section 17(5)(c) and (d) would not apply if the expenditure is
in relation to a Plant & Machinery.
Term ‘Plant & Machinery’ is defined in explanation to Section 17 as
under :
Explanation. - For the purposes of this Chapter and Chapter VI, the expres-
sion “plant and machinery” means apparatus, equipment, and machinery
fixed to earth by foundation or structural support that are used for making
outward supply of goods or services or both and includes such foundation
and structural supports but excludes -
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.
7.3 ”Construction” is defined under explanation to Section 17(5)(c) and
(d) for purpose of these provisions to include re-construction, renovation, additions
or alterations or repairs, to the extent of capitalisation, to the said immovable property.
7.4 Thus, Plant and machinery has been specifically defined as any
equipment, apparatus attached to earth by foundation or structural support used
for supply of goods or services. Plant and machinery to specifically exclude tele-
com towers, pipelines etc. As per the definition of works contract, the works con-
tract inter alia include construction of any immovable property wherein transfer
of property in goods (whether as goods or in some other form) is involved in the
execution of such contract. On the other hand Construction has been defined un-
der explanation to Section 17(5)(c) and (d) as reconstruction, repairs, renovation,
additions etc. to an immovable property the cost of such work is capitalised.
Thus, Construction activity will not qualify as works contract if there is no trans-
fer of property in goods involved i.e. the contractor is supplying service only
without any supply of goods. Works contract may or may not be a construction.
7.5 On discussion of the above definition, it can be seen that “Plant and
Machinery” means :
(i) apparatus, equipment, and machinery, which is
(ii) fixed to earth by foundation or structural support, that are
(iii) used for making outward supply of goods or services or both and includes
such foundation and structural supports
(iv) but excludes -
(a) land, building or any other civil structures;
GST LAW TIMES  27th August 2020  152