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Act Explainers

Section 17(5)(d) CGST Act Explained — When Is Equipment “Immovable Property” for ITC Purposes?

Published 20 Aug 2026· Updated 25 Aug 2026· 3 min read

Executive Summary

Section 17(5)(d) of the CGST Act is one of the most litigated ITC-restriction provisions in the GST framework, precisely because “immovable property” is not exhaustively defined in the Act itself. Following this cycle’s Supreme Court development on telecom towers (Article 1), this explainer sets out what the provision actually says, how the “plant and machinery” carve-out works, and the test courts apply to decide whether a piece of installed equipment is immovable property or not.

What the Provision Says, in Plain English

Section 17(5)(d) blocks ITC on goods or services received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account, including when such goods or services are used in the course or furtherance of business. The critical carve-out is “other than plant or machinery” — if the item in question qualifies as plant and machinery under the Explanation to Section 17, the immovable-property restriction does not apply to it in the first place, regardless of how firmly it is installed.

The Two-Step Question Courts Actually Ask

  1. Is the item “plant and machinery” under the Explanation to Section 17? The Explanation defines plant and machinery broadly (apparatus, equipment, and machinery fixed to earth by foundation or structural support, used for making outward supply, with certain express exclusions such as land, buildings, and civil structures). If yes, the Section 17(5)(d) restriction does not bite at all — this question can end the enquiry in the taxpayer’s favour without even reaching the immovability test.
  2. If the plant-and-machinery carve-out doesn’t clearly apply, is the item genuinely “immovable property”? This is where the permanence-and-annexation test comes in — courts, including the Delhi High Court in the telecom tower matter, ask whether the item is affixed with the intention of permanent annexation to the earth, or whether it is bolted, dismantlable, and capable of being relocated without destruction. A concrete foundation providing stability alone is not, by itself, decisive of permanence.

Why It Matters

Practitioners frequently see the department’s position start and end at “it’s fixed to the ground, therefore immovable, therefore ITC-blocked.” This explainer is a reminder that the analysis has (at minimum) two distinct legal questions — the plant-and-machinery carve-out and the immovability test — and a client’s ITC position can succeed on either one independently.

Key Takeaways

  • Section 17(5)(d) blocks ITC on immovable property construction — but expressly excludes “plant or machinery” from that restriction.
  • Whether an item qualifies as “plant and machinery” under the Explanation to Section 17 is a distinct, and sometimes decisive, question from whether it is “immovable property” — check both.
  • The immovability test turns on permanence and intention of annexation to the earth, not merely on whether the item has a foundation or is bolted down.
  • Capability of dismantling and relocation without destruction is strong evidence against permanence — this was decisive in the telecom tower matter.
  • This is a fact-intensive analysis; the same legal test can produce different outcomes for genuinely different equipment configurations.

Practical Implications

When advising a client facing an ITC denial under Section 17(5)(d), first check whether the asset qualifies as “plant and machinery” under the Explanation — this can resolve the matter without needing to litigate immovability at all. Where that carve-out is unclear or contested, build the factual record around dismantlability, relocatability, and the actual purpose of any foundation or structural support (stability vs. permanent annexation), since this is squarely where courts have focused.

Relevant Sections

  • Section 17(5)(d), CGST Act, 2017
  • Explanation to Section 17, CGST Act, 2017 (definition of “plant and machinery”)
  • Section 74, CGST Act, 2017 (fraud/suppression SCN provision, relevant where such demands are raised)

FAQs

Q: Does a concrete foundation automatically make equipment “immovable property”?
A: No — per the reasoning left undisturbed by the Supreme Court in the telecom tower matter, a foundation providing stability alone does not establish permanent annexation to the earth if the equipment can still be dismantled and relocated.

Q: If equipment doesn’t qualify as “plant and machinery,” is ITC automatically blocked?
A: Not necessarily — the immovability question is still separately relevant. Only if the item is both outside the plant-and-machinery carve-out and found to be immovable property does Section 17(5)(d) block the credit.

Internal Links

  • Supreme Court Dismisses Review Petitions, Upholds Telecom Tower ITC (Bharti Airtel/Indus Towers) — /sc-dismisses-review-telecom-tower-itc-airtel-indus-towers-section-17-5-d/ (Article 1, this cycle)

Author & Disclaimer

Prepared by Finoscape Editorial Team — contact@finoscape.com. This article is for general informational purposes and does not constitute tax or legal advice. Specific ITC positions should be independently assessed with a qualified professional on the facts of each matter.

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