AAR Allows ITC on Specialized Foundation and Structural Supports for Pharmaceutical Machinery

The applicant, M/s CPL Pharmaceuticals Private Limited, is a pharmaceutical company setting up a manufacturing facility for “lyophilized injectables.” This process requires highly sophisticated and heavy plant and machinery, which necessitate foundations and structural supports to ensure stability, precision, and vibration control.

The applicant sought an advance ruling to determine whether they are eligible to claim Input Tax Credit (ITC) on the input services and goods used for the construction of these foundations. The core of the dispute revolved around Section 17(5)(c) and (d) of the CGST Act, which generally blocks ITC for “immovable property” and “civil structures” but provides an exception for “plant and machinery.”

Main Issue: Whether the specialized foundation and structural support constructed for the installation of pharmaceutical plant and machinery qualify as “plant and machinery” under the Explanation to Section 17 of the CGST Act, thereby making the applicant eligible for ITC.

AAR’s Decision: The Authority for Advance Ruling (AAR) ruled in favor of the applicant. The Authority observed that the “Explanation” to Section 17 clearly states that the term “plant and machinery” includes foundations and structural supports that are used to fasten the machinery to the earth.

The AAR noted that the structures in question were not general civil constructions like buildings or warehouses but were specifically designed and engineered to support the weight and operational requirements of the lyophilization equipment. As such foundations are essential for the functioning of the plant and machinery and are specifically excluded from the “immovable property” restriction by the law, the applicant is eligible to avail ITC on the GST paid for their construction.

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