The topic of restriction of input tax credit in respect of an immovable property shall become highest litigative issue under GST regime. In this article, we have once again covered an illogical view given by an Advance Ruling Authority, disallowing input tax credit in relation to installation and erection service of the lift on the ground that such lifts becomes part and parcel of an immovable property i.e. building.
We understand that these judgements are being passed without even understanding the basic concept of restrictions designed under GST law towards immovable property. All such judgement and/or decision would go long way in increasing litigation under GST on this specific issue.
Fact of the case
The Applicant provides various services to its residents for which members are charged maintenance charges under various heads like - service charges, electricity charges, lift charges, insurance, etc. The applicant society charges GST on such maintenance bills as applicable. The Applicant has proposed to replace the existing lift along with its supporting structures.
In this regard, the Applicant want to understand whether they shall be entitled to claim input tax credit of GST paid on replacement of existing lift/elevator to the vendor for manufacture, supply, installation and commissioning of lift/elevator.
Contention of the Applicant
Manufacture, supply, installation and commissioning of lifts/elevators is in the nature of works contract activity covered under the category of services under the GST Act. Further, lift is an equipment which shall be fixed to earth by foundation and structural support and used for making outward supply of services to its members. Therefore, equipment is plant and machinery as per the explanation mentioned in Section 17 of the CGST Act, 2017 and plant and machinery is not covered under the blocked list of ITC under section 17 of the CGST Act, 2017.
Observation of the Hon’ble Maharashtra AAR
The Hon'ble Apex Court in a similar matter has held that after assembling, on completion of process of erection, the item becomes a part of the building or an immovable property and that erection and maintenance of the lifts forms part of the immovable property .
In a similar case the Mumbai High Court Bench, observed that:
“Item in question being immovable property cannot be subjected to excise under the tariff heading claimed by the Revenue. The case sought to be made out by the petitioner is also covered by the decision of the Government of India , wherein it was clearly held that if an article does not come into existence until it is fully erected or installed, adjusted, tested and commissioned in a building, and on complete erection and installation of such article when it becomes part of immovable properly, ..........."
The lift would become an immovable property after being erected and installed as it is attached to the building itself.
The lift after erection and installation is an immovable property because it becomes a part of an immovable property i.e a building. It is to be considered as an integral part of the building itself. It is not a separate part of the building. When any person speaks of such a building, he also includes the lifts as an integral part of the building, like storage water tanks, etc. Further, explanation to section 17(5) is very clear that ITC is available for plant and machinery but excludes land building or any other civil structures.
Manufacture, supply, installation and commissioning of Lifts/ Elevators is in the nature of Works Contract activity which results in creation of an immovable property. Hence in view of the above discussion and Explanation to Section 17(5) of the CGST Act, the AAR are of the opinion that the applicant is not entitled to ITC of GST paid on replacement of existing Lift/Elevator in its premises.
1Triveni Engg. Industries Ltd, v. C.C.E.. 2000(40) RLT 1 (SC) - 2000 (120) ELT 273
2Quality Steel Tubes (P) Ltd, v. C.C.E.. U.P
3Otis Elevator Company (India) vs Superintendent Of Central Excise: 2003 (151) ELT 499 Bom
4Otis Elevator Company (India) Ltd., 1981 (3) ELT720 (GOI)
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