ITC Not Allowed on RCM GST for Industrial Land Lease | AAR

Case Details: Agratas Energy Storage Solutions (P.) Ltd., In re [2025] 180 taxmann.com 450 (AAR-GUJARAT)

Judiciary and Counsel Details

• Vishal Malani & Sushma Mora, Member
• Ishan Bhatt, Adv., Rajesh Shukla, Sr. Gen Manager & Vinod Rai, Gen Manager for the Applicant.

Facts of the Case

The applicant, a GST-registered entity, took a 50-year industrial lease from the Government for setting up a battery cell manufacturing facility. The lease mandated industrial use of the land and commencement of production within three years, with annual rent at 6% of market price subject to five-year escalations. The applicant paid GST on lease rentals under reverse charge and sought an advance ruling on the admissibility of input tax credit (ITC) on such lease payments. It was contended that ITC should be available on recurring rent and for portions of land not immediately used in construction. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that ITC on GST paid on lease rentals of land used for industrial construction is blocked, including recurring rent and amounts attributable to repair, renovation, or vacant areas, as all such services are linked to the construction of immovable property. Exemption for upfront premiums does not extend to recurring lease rentals, and credits cannot be claimed on portions of land held vacant for environmental compliance, as they form part of the industrial facility. Consequently, the applicant is not entitled to ITC on GST paid on lease rentals for any portion of the industrial land during the lease period.

List of Cases Referred to

• CCE, Pune v. Tata Engineering & Locomotives Co. Ltd. 2003 taxmann.com 286/[2003] 158 ELT 130 (SC) (para 6)
• Bayer Vapi (P.) Ltd., In re [2023] 154 taxmann.com 121/100 GST 387/78 GSTL 96 (AAR – GUJARAT) (para 7)
• Chief Commissioner of Central GST v. Safari Retreats (P.) Ltd. [2024] 167 taxmann.com 73/106 GST 250/90 GSTL 3 (SC) (para 7.1)
• Gujarat Chamber of Commerce and Industry v. Union of India [2025] 170 taxmann.com 251/94 GSTL 113 (Gujarat) (para 7.1)
• GACL NALCO Alkalies & Chemical (P.) Ltd., In re [2022] 136 taxmann.com 130/90 GST 897 (AAR – GUJARAT) (para 12)
• GACL-NALCO Alkalies & Chemicals (P.) Ltd., In re [2025] 172 taxmann.com 170/96 GSTL 211 (AAAR-GUJARAT) (para 13)
• Oblum Electrical Industries (P.) Ltd. v. Collector of Customs, Bombay 1997 taxmann.com 507/[1997] 94 ELT 449 (SC) (para 14)
• CIT v. Panbari Tea Co. Ltd. AIR 1965 SC 1871 (para 16).