Paver blocks laid down for parking of cars to avoid quicker wear & tear due to accumulation of water & dust amounts to construction of immovable property and not eligible for GST Input: Says AAR

"Authority held that paver blocks once laid on the land are not movable to another place of use in the same position unless dismantled and laid again at later place. Hence, the paver blocks are permanently embedded to earth and hence laying of the paver blocks on the land amounts to construction of immovable property u/s 17(5). Therefore input tax credit is not allowable to the applicant."

Facts of case and arguments by Petitioner

The applicant is engaged in providing warehousing, storage and support services to the Original Equipment Manufacturers (OEMs) of automobile industry, transports cars/tractors using its fleet of car carrier vehicles. During the course of these services, the cars are stored in the applicant’s stock yard prior to their transit to the respective car dealers. On storage rentals of these vehicles, the applicant Company has been collecting and paying applicable GST.

Applicant has purchased tax paid Paver Blocks which are laid in the parking area of the land without any attachment to the earth. The object of laying such blocks is to ensure efficient and safe parking of automobiles of OEMs during the contract period. If the cars are placed on the ordinary surface, it will be subject to quicker wear & tear due to accumulation of water, dust etc. in the wheels of such automobiles. Such paver blocks are not to be permanently embedded on earth and are capable of being removed as such without causing damage to them for reuse elsewhere. Hence such Paver Blocks are to be construed as moveable items.

Therefore, Applicant feels that it is eligible to avail Input Tax Credit in respect of taxes paid on purchase of such Paver Blocks laid on land being used in the course of providing its output services to customers under the head stockyard management services. Laying of Paver Blocks on land does not amount to construction of Immovable property u/s. 17(5)(c) of the CGST Act, 2017. Expenses on the Paver Blocks are not capitalized as a part of immovable property (Land) in the applicant’s books of accounts, hence the input credit on the same is not disallowable u/s. 17(5)(d) r.w. explanation to section 17(5) of CGST Act, 2017. Further, as per explanation to Section 17(5)(c) & (d) of CGST Act 2017, the prohibition to avail input tax credit is applicable only in respect of expenditure which is capitalized in the books of account. Hence, if the expenditure on purchase of paver block is not capitalized & treated as revenue expenditure, there is no bar on availing credit.

Held by Authority

The purpose of laying of paver blocks as per applicant is to ensure efficient parking of automobiles during contract period. If the cars placed on the ordinary ground, it will be subject to the quicker wear and tear due to accumulation of water, dust etc. in the wheels. Hence only laying of paver blocks in loose form on the land is not sufficient. To serve the applicant’s purpose, compact, firm structure and close fixing of blocks is required. However, applicant is silent on whether cementing material or interlocking blocks used or not. But it appears from photographs attached by the applicant that, paver blocks are fastened to land using interlocking blocks and firm support of outer wall. These blocks are not kept loosely on the ground. Hence, mere cementing material not used doesn’t mean paver blocks are not fasted to earth. Rather with support of outer wall and interlock system blocks are fastened to earth. Further, laying of such block is time consuming, skill full job requires to be carried out with due diligence and same way activity of dismantling also. Therefore mere capability of removal and reuse elsewhere, doesn’t mean blocks are not permanently embedded to earth. One cannot shift paver blocks as when required like moveable goods. It requires certain period of permanency and also without fixing paver block using either cementing material or interlocking system, you cannot enjoy benefits of laying paver blocks. The flexibility to re-use does not mean that blocks will be removed and re-erected frequently. They are meant to be permanently fixed to earth however when the need arise, client may remove them and re-erect. So primarily nobody will lay paver blocks with intention to remove it. It appears that to give permanence, dealer has entered into contract with OEM and land owner also.

Paver blocks once laid on the land are not movable to another place of use in the same position unless dismantled and laid again at later place. Hence, the paver blocks are permanently embedded to earth and hence laying of the paver blocks on the land amounts to construction of immovable property u/s 17(5). Therefore input tax credit is not allowable to the applicant.

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