Yes, ITC is available on VRF AC provided:

• It is used for business,

• It is not capitalised as part of building construction,

• It is not for personal use.

Can you give me any case law/ ruling

Yes — there are case laws and advance rulings directly relevant to ITC on ACs / HVAC / VRF systems.
Here are the most useful ones you can cite:

✅ 1. JEANS KNIT PRIVATE LIMITED

AAR – Tamil Nadu
Order No.: TN/24/AAR/2020
Date: 20.05.2020

Key point:

The Authority held that Input Tax Credit is allowed on Air-Conditioners and Cooling Systems installed in factory premises, because they fall under “plant & machinery” and are NOT part of immovable property.

👉 Very strong ruling in favor of ITC on ACs / VRF-type systems.

✅ 2. Spenomatic India Pvt Ltd

AAR – Karnataka
Order dated: 17.09.2020

Held:

AC systems and HVAC equipment used in manufacturing or business premises are eligible for ITC because they are not part of construction of immovable property, but capital goods used for business.

✅ 3. Tarun Realtors Pvt Ltd

AAAR – Maharashtra
Date: 24.11.2021

Held:

HVAC & VRV/VRF systems embedded in civil structure (i.e., part of building construction) → ITC BLOCKED u/s 17(5)(c)/(d).

But if AC/VRF is not capitalised as immovable property, ITC is allowed.

👉 This ruling is important because it makes a clear distinction:

• If VRF is part of construction → No ITC

• If VRF is an independent business asset (plant & machinery) → ITC allowed

✅ 4. Wolkem India Pvt Ltd

AAAR – Rajasthan
Date: 22.03.2019

Held:

HVAC, cooling machinery, and ventilation systems installed in a factory qualify as Plant & Machinery → ITC allowed.

📌 What these rulings collectively establish

✔ ITC allowed when:

• VRF/VRV ACs are used for business

• Installed in offices/factories/shops/warehouses

• Treated as plant & machinery

• Not capitalised as part of building construction

❌ ITC not allowed when:

• VRF AC is installed during building construction and is embedded into the immovable property

• Or capitalised as “building” instead of “plant & machinery”

✅ Best ruling for your case (most cited)

JEANS KNIT PVT LTD (Tamil Nadu AAR)

Very clear language that ITC is eligible on ACs used in business and treated as plant & machinery.

ITC on a VRF air-conditioning system is generally not available if it is installed as part of an immovable building and treated as a fixture or structural component. Section 17(5)(c) and (d) of the CGST Act restrict credit on works-contract services and goods/services used to construct immovable property (other than plant and machinery), including where used for business.

The outcome depends on the installation and records: a system that remains movable equipment, rather than becoming part of the building, may be eligible subject to normal ITC conditions. The statutory explanation to Section 17(5) excludes apparatus and equipment used for making outward supplies from “plant and machinery”; however, that does not automatically make building air-conditioning eligible. Review the design, method of fixing, civil works, invoices and accounting treatment before claiming.

This assessment fits into the broader review of fixed-asset invoices and GST returns. Manual classification can be difficult, and automation reduces repetitive checks while professional judgment remains in control. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. For support with compliance workflows, connect with us on WhatsApp https://wa.me/message/3HVOZ7HIY4ESC1.