GST Input Tax Credit for Breakwater Wall Construction
The Authority for Advance Ruling decided that GST paid on constructing a breakwater wall is not eligible for input tax credit.
- Ruling
- NO.GST-ARA-123/18-19/2024-25/B- 640, Mumbai, dt. 18/12/2025
- Dated
- 18 Dec 2025
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Konkan LNG asked if they could claim input tax credit for a breakwater wall.
- The Authority ruled the wall is an immovable civil structure, not plant and machinery.
- Input tax credit is blocked for construction of immovable property under Section 17(5).
In short
Konkan LNG Private Limited asked the Authority for Advance Ruling (AAR) if they could claim input tax credit (ITC) on the GST paid to build a breakwater wall for their jetty. The company argued the wall was essential for their operations, but the tax authority disagreed, stating that the law blocks credit for construction services used to build immovable property.
What has changed
How it worked before
Businesses often debated whether large structures essential to a business, like jetties or specialized walls, could be classified as 'plant and machinery' to bypass the general ban on claiming input tax credit for construction.
What has changed
The Authority confirmed that a breakwater wall is a civil structure and not 'plant and machinery.' Because of this, the GST paid on the construction contract cannot be claimed as a credit. This decision reflects recent legislative changes that strictly limit what qualifies as plant and machinery, making it much harder to claim credit for construction projects.
Who this affects
Businesses in the infrastructure, manufacturing, or logistics sectors that are building large, permanent structures like walls, jetties, or warehouses.
An example
A logistics company builds a large concrete retaining wall to protect their warehouse from flooding. They wonder if they can claim the GST paid on the construction as input tax credit. Based on this ruling, the tax authority would likely view the wall as an immovable civil structure and deny the credit, regardless of how essential the wall is to protecting the warehouse.
What you should do
If you are planning a similar construction project, do not assume you can claim input tax credit based on this ruling. An advance ruling only applies to the specific company that asked the question and its own tax office. You should consult with your tax advisor to review your specific project plans against the current Section 17(5) of the CGST Act.
If you do nothing
If you claim input tax credit on construction costs that are legally blocked, you risk a tax demand notice from your local officer. You would then be required to pay back the credit, plus interest and potential penalties. Relying on a ruling that does not apply to your specific case is not a valid defense during an audit.
The terms explained
- Input Tax Credit
- The tax a business pays on its purchases that it can use to reduce the tax it owes on its own sales.
- Works Contract
- A contract that involves both the supply of goods and services, typically used in construction projects.
- Immovable Property
- Land, buildings, or structures that are permanently attached to the ground and cannot be moved without significant damage.
The ruling in detail
Authority for Advance Ruling
M/s. Konkan LNG Private Limited
NO.GST-ARA-123/18-19/2024-25/B- 640, Mumbai, dt. 18/12/2025 · Maharashtra
Questions before the authority
- Whether on the facts and circumstances of the case and as per the law, the applicant is not eligible to avail/utilize the input tax credit of the taxes paid in terms of section 16 read with section 17 of the MGST ACT / CGST ACT (CGST/ SGST / IGST ) to the supplier of goods/ services on the construction of the break water wall, which is an important and integral part of the existing jetty and very much required for the purpose of safety and longevity of the jetty and it imperative for making the existing jetty as fully workable as an all-weather jetty and hence improves the operational efficiency of the applicant.
- Whether on the facts and circumstances of the case and as per the law and scope of work, the works contract services which the KLPL intends to procure is not predominantly earth work (that is, constituting more than 75 percent. of the value of the works contract) and the services of the works contract by the contractor is covered under item (vii) of serial No.3 of Table of the Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 as amended by Notification No. 31/2017 - Central Tax (Rate) dated 13th October, 2017.
Facts
The applicant operates an LNG regasification plant and constructed a breakwater wall to protect its jetty from rough sea conditions, enabling year-round operations. They sought an advance ruling on whether they could claim Input Tax Credit (ITC) on the goods and services procured for this construction. The project involved a works contract with M/s. Larsen & Toubro Ltd.
Ruling
| Question | What the authority ruled |
|---|---|
| Eligibility for ITC on breakwater wall construction | No, the applicant is not eligible to avail the ITC. The breakwater is classified as an immovable structure and not plant and machinery. |
| Classification of works contract services | No ruling is given. The Authority stated it cannot rule on matters affecting the rights of a non-party contractor. |
The Authority ruled that the applicant is not eligible to avail ITC on the services used for the construction of the breakwater wall. Regarding the second question, the Authority declined to provide a ruling, citing that the applicant is not the service provider and that such a ruling would affect the rights of the contractor who is not a party to the application.
Reasoning
The Authority determined that the breakwater wall is a **civil structure** and does not qualify as 'plant and machinery' under the explanation to Section 17 of the CGST Act. It held that the construction is blocked under **Section 17(5)(c)** and **Section 17(5)(d)** of the CGST Act, which restricts ITC for works contract services used for the construction of immovable property. The Authority further noted that recent amendments via the Finance Act, 2025, and the insertion of Explanation 2 to Section 17, clarify that references to 'plant and machinery' must be construed strictly, rendering the applicant's reliance on the functionality test and the Safari Retreats judgment inapplicable.
Provisions relied on
- Section 16 of the CGST Act
- Section 17 of the CGST Act
- Section 17(5)(c) of the CGST Act
- Section 17(5)(d) of the CGST Act
- Section 95 of the CGST Act
- Section 100 of the CGST Act
- Notification No. 11/2017-Central Tax (Rate)
- Notification No. 31/2017-Central Tax (Rate)
For the practitioner
This ruling reinforces the **strict interpretation** of the exclusion of civil structures from the definition of 'plant and machinery' for ITC purposes. It highlights the Authority's refusal to rule on tax classifications that primarily impact the service provider's obligations when the provider is not a party to the proceedings. Practitioners should note the impact of the 2025 legislative amendments in narrowing the scope for claiming ITC on immovable property construction.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/3-konkan_lng_private_limited_0.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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