TN AAAR Denies GST ITC on Land Lease U/S 17(5)(d) for Setting Up Plant and Machinery | Biz Flow Kit
The appellant, M/s. Inox Air Products Private Limited is in the manufacturing of industrial and medical gases business and plans to establish an Air Separation Unit (ASU) at Hosur. Towards the same objective, it entered into an arrangement with M/s. India Pistons Ltd. to acquire leasehold rights over land for a long duration of 72 years, against a consideration of Rs. 15 crore. GST was imposed on this transaction, and the appellant asked to avail Input Tax Credit (ITC) on the same.
The Authority for Advance Ruling (AAR) analysed the problem that refused the ITC by invoking Section 17(5)(d) of the CGST/TNGST Act. Therefore, the case was remanded by the High Court for fresh consideration.
The appellant before the appellate authority for Advance Ruling (AAAR) claimed that the lease was integral to setting up a plant and thus needed to be entitled under the plant and machinery exception to blocked credit.
The problem- Whether ITC on GST filed for acquiring leasehold rights in land for setting up an Air Separation Plant is entitled as “plant and machinery” or is restricted u/s 17(5)(d) of the CGST/TNGST Act.
Decision of tribunal- The refusal of ITC has been maintained by the appellate authority and ruled against the appellant. However, plant and machinery is not included in the restriction u/s 17(5)(d), therefore the statutory definition excludes land from its ambit. The authority outlined that the nature of the inward supply, being leasehold rights in land, was determinative.
As land is not included in the definition of plant and machinery, any GST filed on its acquisition, even in the form of long-term leasehold rights, shall not be entitled to ITC.
Also Read: Madras HC: GST Order Under Section 17(5) Invalid Due to Missing Reason
The legal position does not get revised from the fact that the land was intended for setting up an Air Separation Plant. Subsequently, the ITC claim was held to be blocked u/s 17(5)(d).
| Name of Appellant | M/s. Inox Air Products Private Limited |
| GSTIN | 3ЗАААCI5569D1ZR |
| Order No | AAAR/04/2026 (AR) |
| Represented by | Supreme Kothari, Mallows Priscilla, Economic Laws Practice |
| TN AAAR | Read Order |
Disclaimer:- “All the information given is from credible and authentic resources and has been published after moderation. Any change in detail or information other than fact must be considered a human error. The blog we write is to provide updated information. You can raise any query on matters related to blog content. Also, note that we don’t provide any type of consultancy so we are sorry for being unable to reply to consultancy queries. Also, we do mention that our replies are solely on a practical basis and we advise you to cross verify with professional authorities for a fact check.”
