ITC can be claimed on furniture used for testing says Karnataka AAR

The Karnataka bench for the Authority in Advance Ruling has held that the taxpayer can claim input tax credit or ITC on supply of equipment, furniture, reagents/consumables used for performing tests. The applicant, an enterprise offering molecular diagnostic services for a local hospital. The hospital had provided a lab space of 5000 square feet for the enterprise to set up a molecular diagnostics lab. This lab would be a clean room which would be built with PUF panels, Air Handling Units, Lab furniture and power backup which would be equipped with all the latest technology medical lab equipment. All the equipment would be purchased by the applicant and installed at the lab in the hospital. The applicant sought an advance ruling to confirm if they could avail ITC on the equipment, furniture, etc. and on the consumables that would be purchased for performing the tests as the reagents or consumables are taxable and not the test.

The Karnataka bench of the Authority for Advance Ruling held that the applicant needs to restrict the credit to the amount attributable to taxable supplies including zero rated supplies in the case of both capital goods as well as reagents/consumables or drugs.