QUESTION
One of our client constructing movie theater. As per section 17(5) he is not eligible to get credit of Construction materials like cement, steel, sand, other construction materials & labour used/paid for construction of theater. Now, Is he eligible availed credit of of tax paid on purchase of Air condition & sound system, elevators, chairs to be used in theater as against amount collected for movie tickets in future.
Answer
Facts of the case: A Client constructing
movie theater is not eligible to get credit of Construction materials like
cement, steel, sand, other construction materials & labour used/paid for
construction of theater. Now, Is he eligible to avail credit of tax paid on
purchase of Air condition & sound system, elevators, chairs to be used in
theater as against amount collected for movie tickets in future.
Law Applicable: SECTION 17 OF CGST ACT
(5) Notwithstanding anything contained in sub-section (1) of section 16 and
subsection (1) of section 18, input tax credit shall not be available in respect
of the following, namely:-
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(d) goods or services or both received by a taxable person for construction of
an immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the course or
furtherance of business.
Explanation. ''For the purposes of clauses (c) and (d), the expression
'construction' includes re-construction, renovation, additions or alterations or
repairs, to the extent of capitalisation, to the said immovable property;
Interpretation: Term Immovable property has not been defined in CGST Act.
... As per Section 3(26) of the General Clauses Act, 1897, immovable property
includes “land, benefits to arise out of land, and things attached to the earth,
or permanently fastened to anything attached to the earth”.
Thus as per section 17(5) ITC is not restricted on the items which can be
removed and shifted to other place and can be considered as being not part of
the immovable property like sound system, elevators, chairs, indoor units of the
AC but not the pipe fitting and duct of the AC.
Conclusion: ITC is restricted on goods & services used for construction of
immovable property as per section 17(5). However ITC is not restricted on
furniture, plant & machinery and movable items that are not attached to earth
and can be removed and shifted to other place. Thus ITC will be eligible on
Furniture (chairs), sound sytem, indoor units of AC but not on the pipe fitting
and duct of the AC.(Reply dt.16-07-2020)