• Dated 04^th May, 2026

ITC Admissible on Foundation & Structural Support of Plant and Machinery: Gujarat AAR

Brief Facts of the Case:

The Applicant is engaged in the manufacture of Active Pharmaceutical Ingredients (API), set up a Solvent Recovery Plant (SRP) and a Mobile Effluent Treatment Plant (METP) within its factory to improve operational efficiency and ensure treatment of wastewater. For installation of various heavy machinery such as reactors, distillation columns, heat exchangers, storage tanks and pumps, the Applicant constructed RCC foundations and steel structural supports, which were essential to ensure stability, alignment and proper functioning of such equipment. The Applicant procured works contract services for such construction and availed input tax credit (ITC) on the GST charged thereon. The issue before the Authority was whether such ITC is admissible in light of restriction under Section 17(5)(c) of the CGST Act relating to works contract services for immovable property.

Assessee's Contentions:

The Applicant contended that the input services were used in the course or furtherance of business in terms of Section 16 of the CGST Act, as the SRP and METP plants were integral to the manufacturing process. It was argued that the foundation and structural supports are not independent civil structures but form an integral part of "plant and machinery" as defined under the Explanation to Section 17, which expressly includes such supports. The Applicant further submitted that ITC was claimed only in respect of structural components directly attributable to installation and functioning of machinery, and not for general civil construction works.

Department's Contentions:

The department was of the view that the services availed by the Applicant were in the nature of works contract services for construction of immovable property, which are specifically restricted under Section 17(5)(c) of the CGST Act. Accordingly, ITC on such services should not be allowed, as the construction of RCC foundations and structural supports could be considered as civil structures forming part of immovable property.

Court's Held:

The Authority for Advance Ruling, Gujarat held that while Section 17(5)(c) restricts ITC on works contract services used for construction of immovable property, the restriction does not apply where such services are used for construction of plant and machinery. It was observed that the equipment installed by the Applicant qualifies as apparatus and machinery used for making outward supplies, and the RCC foundations and structural supports are essential and inseparable components for their functioning. The Authority noted that the definition of "plant and machinery" under the Explanation to Section 17 specifically includes foundation and structural support, and such structures cannot be treated as independent civil structures. Accordingly, ITC on input services used for construction of such foundation and structural supports is admissible.

BTA Comments:

This ruling reinforces the principle that ITC eligibility should be determined based on the functional nexus of the expenditure with business operations. Where foundations and structural supports are indispensable for installation and operation of plant and machinery, they would qualify as part of plant and machinery itself, thereby falling outside the restriction under Section 17(5). The decision provides clarity and relief to manufacturing entities; however, taxpayers must ensure proper segregation between eligible structural supports and ineligible general civil construction to mitigate litigation risks.

Author: Sneha Nandi