Gujarat AAR Denies ITC on Warehouse Construction After Finance Act, 2025 Amendment

The present application, No. Advance Ruling/SGST&CGST/2025/AR/14, has been filed by a company named Premlata Rakesh Jain (trade name: M/s Sambhav Warehousing) before the Gujarat Authority for Advance Ruling (AAR), Goods and Services Tax (GST), D/5, Rajya Kar Bhavan, Ashram Road, Ahmedabad – 380 009. The applicant is registered under the GST Act, having GSTIN 24AEJPJ0437K2ZK, located at Plot No. 124, Sector 4, Gandhidham, Kachchh, Gujarat-370201.

The applicant is engaged in the business of providing storage and warehouse services. The applicant is required to purchase cement, steel, beams, columns, etc., for the construction of a warehouse. According to the applicant, previously, the Input Tax Credit (ITC) on material or services related to construction was covered under Block Credit under Section 17(5) of the CGST Act, 2017, hence not allowed to be availed even though the same was used for the furtherance of business.

However, as per an earlier judgement of the Supreme Court in the case of Safari Retreats, an advance ruling is required in this matter. As per the ruling, ITC in such a case is available by applying the functional use concept. Hence, the applicant has sought the present advance ruling to clear the same query.

Question Asked by Applicant:

The applicant has asked the following question, seeking the present advance ruling no. GUJ/GAAR/R/2025/62:

“Question: Whether ITC is admissible for the goods or services utilised for the construction of a warehouse or shed from which storage and warehousing services are provided as furtherance of business or provided on rent.”

Answer Given by AAR Gujarat:

The following answer has been given by the AAR Gujarat to the aforesaid question asked by the applicant:

The applicant has raised a query about whether ITC can be claimed on goods and services used to construct a warehouse that will be used for business or leased out. The applicant, on the other hand, has also admitted that ITC on such purchases is blocked under Section 17(5) of the CGST Act; however, they cite the Supreme Court’s judgement in the Safari Retreats case to claim ITC based on functional use.

In Safari Retreats, the Supreme Court held that ITC on works contract services for the construction of a building is blocked because “plant and machinery” excludes buildings. For goods and services used on one’s own account, the Court allowed a functional test since the term “plant or machinery” was not defined earlier.

However, the law was amended by the Finance Act, 2025, replacing “plant or machinery” with “plant and machinery” in Section 17(5)(d), with retrospective effect from July 01, 2017. The amendment also nullified the effect of the Safari Retreats judgment.

Since “plant and machinery” excludes buildings and civil structures, ITC on cement, steel, and construction services used for building a warehouse is not allowed, even if the warehouse is used for business or leasing.