No Tax Credit for GST on Leasehold Land Rights

• Background:

- M/s Bayer Vapi Private Limited (the Applicant) wanted to lease land to expand its chemical manufacturing facility.

- They entered into an agreement with M/s Vapi Enterprises Ltd. (the Transferor) to acquire the lease rights.

• Question:

- The Applicant asked if they could claim Input Tax Credit (ITC) for the Goods and Service Tax (GST) they paid on services related to this lease.

• Ruling:

- The Gujarat Authority for Advance Ruling (AAR) referred to Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (CGST Act).

- This section states that ITC cannot be claimed on GST paid for services related to the construction of immovable property (except for plant and machinery) when it's used for business purposes.

• Previous Rulings:

- The AAR noted that previous rulings in Gujarat and Telangana had clarified that ITC is not available for services related to land when used for constructing immovable property, even if it's for business purposes.

• Applicant's Intent:

- The AAR looked at the Applicant's documents and Memorandum of Understanding (MOU) and confirmed that the Applicant intended to lease industrial land to set up or expand their manufacturing plant.

• Final Decision:

- As per Section 17(5)(d) of the CGST Act, the AAR ruled that the Applicant could not claim ITC for the GST paid on the services provided by the Transferor in the form of lease rights for the land, as it was meant for constructing an immovable property.

In simple terms, the ruling states that the Applicant cannot get a tax credit for the GST they paid on services related to leasing land for building purposes, even if it's for their business.