GST | ITC Not Available On Construction Of Warehouse Used For Storage Or Leasing: Gujarat AAR
The Gujarat Authority for Advance Ruling (AAR) has held that input tax credit (ITC) is not admissible on goods and services used for construction of a warehouse or shed, even when such warehouse is used for providing taxable storage and warehousing services or is leased out for business purposes. The ruling was delivered by the bench of CGST Member Vishal Malani and SGST...
The Gujarat Authority for Advance Ruling (AAR) has held that input tax credit (ITC) is not admissible on goods and services used for construction of a warehouse or shed, even when such warehouse is used for providing taxable storage and warehousing services or is leased out for business purposes.
The ruling was delivered by the bench of CGST Member Vishal Malani and SGST Member Sushma Vora in the application of a registered GST assessee engaged in providing storage and warehousing services. The assessee proposed to construct a warehouse and sought clarity on eligibility of ITC on construction inputs such as cement, steel, beams, columns and related construction services.
As per the applicant's interpretation of law, ITC would be allowed on construction expenses for building intended for leasing, treating such building as plant based on their functional use, in view of the judgement of the Supreme Court in the case of Safari Retreats.
The Authority Bench examined Sections 17(5)(c) and 17(5)(d) of the CGST Act, 2017, and noted that while Safari Retreats had allowed application of the functionality test for the expression “plant or machinery” under Section 17(5)(d), the legal position has since changed.
Under the amended law, the definition of “plant and machinery” expressly excludes land, buildings and other civil structures, thereby restoring the complete bar on ITC for construction of immovable property used in business, including warehouses.
The AAR noted that Section 124 of the Finance Act, 2025 amended Section 17(5)(d) by substituting the words “plant or machinery” with “plant and machinery” retrospectively from 1 July 2017, and by inserting an explanation nullifying the effect of any contrary judicial ruling. The amendment was notified to come into force from 1 October 2025.
Applying the amended provisions, the Authority ruled that ITC on construction materials and services used for building the warehouse is blocked, irrespective of whether the warehouse is used for providing taxable warehousing services or leased to tenants.
It was thus ruled that ITC is not admissible for the goods or services utilized for the construction of warehouse or shed from which storage and warehousing services are provided as furtherance of business or provided on rent.
Applicant's Name: PREMLATA RAKESH JAIN
Advance Ruling Number: GUJ/GAAR/R/2025/62
Appearance for Applicant: Mehul Pandya