The Tamil Nadu Authority for Advance Ruling (AAR) has clarified that Input Tax Credit (ITC) cannot be claimed on electrical installation works undertaken for factory expansion, ruling that such expenses fall under the blocked credit provisions of the GST law.

The bench of B. Suseel Kumar (SGST Member) and C. Thiyagarajan (CGST Member) ruled that the GST paid on the reccipt of Works Contract’ service involving electrical installations for the new factory project, do not become eligible for availment of ITC as they are blocked under clause (c) of the Section 17(5) of the CGST Act, 2017. Notwithstanding the same, even in the event of considering the supply as an independent ‘Construction’ or Installation’ service, the same again stands blocked under clause (d) of the Section 17(5).

The applicant, Shibaura Machine India Private Limited is a manufacturing company, engaged in the production of injection moulding machinery, had recently expanded its operations by constructing a new facility adjacent to its existing plant near Chennai. As part of the expansion, it entered into a contract for the supply, installation, testing, and commissioning of electrical works, including wiring, fittings, and fire alarm systems.

The company sought an advance ruling on Eligibility of ITC on electrical works carried out for expansion and timeline for availing ITC on tax invoices related to advance payments and adjustments.

The AAR referred to earlier decisions, including those by the Karnataka AAR (2019) and the Gujarat Appellate Authority (2023), both of which had held that ITC on electrical works and fittings is not permissible.

It concluded that electrical installations form part of immovable property and therefore fall under the restrictions in Sections 17(5)(c) and 17(5)(d) of the CGST/TNGST Acts, 2017, which block ITC on construction-related works contracts.

Ruling Details

Applicant’s Name: M/s. Shibaura Machine India Private Limited

Ruling Date: 2025-08-18

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