ITC on Firefighting & Public Health Systems Blocked: Tamil Nadu AAAR Upholds Denial Under Section 17(5) for Factory Expansion

The Tamil Nadu Appellate Authority for Advance Ruling (AAAR) has upheld the denial of Input Tax Credit (ITC) on Goods and Services Tax paid for firefighting systems and public health engineering (PHE) works installed during the expansion of a manufacturing facility, holding that such installations form part of an immovable property and are hit by the blocking provisions of Section 17(5)(c) and 17(5)(d) of the CGST/TNGST Acts, 2017. The bench of Madan Mohan Singh and S. Natrajan the expression “plant and machinery” must be read conjunctively and strictly as defined under the CGST Act. Merely qualifying as apparatus or equipment is insufficient unless the installation is fixed to earth by foundation or structural support, and used for making outward supply of goods or services The appellant, M/s. Shibaura Machine India Private Limited engaged in the manufacture of injection moulding machinery, undertook an expansion of its factory at Chembarambakkam, Chennai. For this purpose, it entered into a composite contract with M/s. SMCC Construction India Limited for design and construction of a new factory, with a total contract value of approximately ₹90.45 crore (exclusive of GST). The contract broadly covered four components Civil works and site grading, Pre-engineered building (PEB) works, Firefighting system (FFS) and Public health engineering (PHE) works. The dispute confined to the eligibility of ITC on FFS and PHE, involving supplies such as fire pumps, hydrant systems, sprinklers, fire alarms, extinguishers, sanitary fittings, sewage systems, water supply systems and rainwater harvesting infrastructure. The appellant sought an advance ruling on whether ITC is available on firefighting systems and public health equipment used for expansion of the factory. The timeline for availing ITC on invoices raised towards the “advance component” of the contract. The AAR ruled against the appellant, holding that ITC on such systems was blocked under Section 17(5)(c) and (d), and consequently declined to answer the second question. The appellant contended that firefighting and PHE systems are mandatory infrastructure under the Factories Act, 1948 and the Occupational Safety, Health and Working Conditions Code, 2020. These systems are apparatus or equipment, qualifying as “plant and machinery” under the Explanation to Section 17(5), and therefore excluded from the ITC block. Many components such as fire extinguishers, alarms, sprinklers and signages are movable, detachable and capable of reinstallation without substantial damage. The appellant contended that AAR erred in treating the entire contract as “permanent work” and ignored the functional distinction between civil structures and operational equipment. The AAAR held that the contract in question was a composite works contract involving supply, installation, testing and commissioning of firefighting and public health systems for a new factory. Once installed, these systems are assimilated into the building infrastructure, concealed within walls, floors and ceilings, and lose independent existence. The AAAR held that even if some components are detachable, their object and intendment is to provide permanent beneficial enjoyment of the immovable property. The systems are not marketable as standalone goods and are tailor-made for the specific factory layout, failing the “marketability test”. Firefighting and PHE installations, though performing specific safety and sanitation functions, are not used for making outward supply of goods or services, as required under the statutory definition of “plant and machinery”. Mandatory nature of infrastructure under labour and safety laws does not override the explicit ITC restrictions under Section 17(5). The authority held that firefighting and PHE systems only facilitate safe functioning of the factory and do not directly or functionally contribute to outward supply. The Appellate Authority concluded that, “Installation of Fire-Fighting System and Public Health Engineering when attached to earth or fastened to the building becomes part of immovable property, and ITC thereon is blocked under Sections 17(5)(c) and 17(5)(d) of the CGST/TNGST Acts, 2017.” Ruling Details Applicant’s Name: M/s. Shibaura Machine India Private Limited Ruling Date: 18/12/2025 Click Here To Read Ruling Read More: Onerous Bank Guarantee for Provisional Release Unsustainable, Scales Down Customs Conditions in Fabric Import Dispute: CESTAT

ITC on Firefighting & Public Health Systems Blocked: Tamil Nadu AAAR Upholds Denial Under Section 17(5) for Factory Expansion

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