ITC Allowed On Support Structures As Essential For Machinery: AAR

The Gujarat Authority for Advance Ruling (AAR) has held that Input Tax Credit (ITC) is admissible on input services used for construction of foundation and structural support for plant and machinery, where such structures are essential for the functioning of machinery used in manufacturing operations. The bench of Vishal Malani and Sushma Vora has observed that the definition of “plant and machinery” under the CGST Act includes apparatus, equipment, and machinery fixed to earth by foundation or structural support, used for making outward supply of goods or services. It further noted that the exclusion clause under the definition does not specifically exclude foundation and structural supports related to plant and machinery. The ruling was delivered in the case of a pharmaceutical manufacturer engaged in the production of Active Pharmaceutical Ingredients (APIs), where the applicant had set up a Solvent Recovery Plant (SRP) and a Mobile Effluent Treatment Plant (METP). These plants were used for recovery of solvents and treatment of wastewater generated during the manufacturing process. The applicant had incurred expenditure on civil works such as reinforced cement concrete (RCC) foundations, steel structures, pedestals, beams, and other load-bearing components required to install and operate machinery like reactors, distillation columns, heat exchangers, storage tanks, pumps, chillers, and separators. These structures were specifically designed to support heavy machinery, absorb vibrations, ensure alignment, and maintain operational efficiency. The core issue before the AAR was whether ITC could be availed on such input services used for constructing foundation and structural support, or whether the same would be restricted under Section 17(5) of the CGST Act, which blocks credit on works contract services used for construction of immovable property. The applicant contended that the foundation and structural support form an integral part of “plant and machinery” as defined under the Explanation to Section 17 of the CGST Act. It was argued that the machinery cannot function without such support systems, and therefore, these structures should not be treated as independent immovable property but as components of plant and machinery. The AAR examined the technical and functional role of these structures and noted that the machinery installed in the SRP and METP plants requires proper support for stability, alignment, and safe operation. The authority observed that without such foundation and structural backing, the machinery would be prone to misalignment, operational hazards, and inefficiency. The authority also referred to CBIC Circular No. 219/13/2024-GST, which clarified that ITC is admissible on ducts and manholes used in Optical Fibre Cable (OFC) networks, as they form part of plant and machinery. Drawing an analogy, the AAR held that foundation and structural supports, being essential for installation and functioning of machinery, would similarly qualify for ITC. Rejecting the contention that such construction amounts to creation of immovable property attracting restriction under Section 17(5), the AAR held that when such works are directly linked to installation of plant and machinery, the restriction would not apply. The AAR ruled that the applicant is eligible to avail ITC on input services used for construction of foundation and structural support for plant and machinery installed within the factory, including those used for solvent recovery and wastewater treatment in the manufacturing of APIs. Ruling Details Applicant’s Name: M/s. Cadila Pharmaceuticals Limited Citation: JURISHOUR-755-AAR-2026(GUJ) Ruling Date: 01/04/2026 Click Here To Read Ruling Read More: GST Returns Strengthened with Tech-Driven Compliance, New IMS & ITC Controls Introduced: ICAI

ITC Allowed On Support Structures As Essential For Machinery: AAR

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