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

  • Blog|News|GST & Customs|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 27 November, 2025

Latest from Taxmann

ITC on industrial land lease

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

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied