2020 (10) TMI 1334 - AAAR - GST

Input Tax Credit - Purchase of Lift would be available to Hotel as it has been used in the course or for the furtherance of business - lift installed is a part of immovable property, or not - capital goods are used in providing taxable services - compliance with the requirements of section 16 of CGST Act 2017 - Blocking of credit in terms of section 17(5) (d) of CGST Act, 2017 - HELD THAT - As per the Section 17 (5) of CGST Act mentioned above, the Input tax credit shall not be available on the goods and services or both 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 or both are used in the course or furtherance of business - The definition of immovable property is not provided under GST Act. According to section 3 (26) of the General Clauses Act, 1882, Immovable property shall include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth . According to section 3 of the Transfer of Property Act, 1882, Immovable property does not include standing timber, growing crops or grass . The impugned item 'lift' merits classification as 'plant and machinery' and since 'plant and machinery' is excluded from the term 'immovable property', for the purpose of 17(5) (d), again appellant has pleaded that the plant and machinery includes certain foundations and structures however certain structures and foundations are excluded from Plant and Machinery and these are, land, building or any other civil structures, telecommunication towers and pipelines laid outside the factory premises - the lift installed in the building for the purpose of furtherance of business cannot be deemed to be a part of the building or an immovable property just because of the fact that it was fastened in the civil structure of the building by way of nuts, bolts and fasteners. Further, the lift so installed in his Hotel is not a customized lift but a pre-designed lift. These lifts require a specified area in a building and can easily be installed by fastening nut and bolts and other fasteners in the building and no specific modification or alteration is required in the building structure. Thereafter these lifts can be disassembled without causing any structural damage to the building and reassembled on need and can be resold in open market. Lift purchase does not qualify as goods but is works contract resulting into an immovable property. High rise buildings' sanctioned plan includes lifts or escalators as fixtures - the appellant has not made any statement regarding capitalization of lift expenses. Thus, the ITC is not admissible on purchase of Lift as per the Section 17(5) (d) of CGST Act, 2017.

Summary

Issues Involved:
1. Eligibility of Input Tax Credit (ITC) on the purchase of lifts for a hotel under the CGST Act, 2017.
2. Interpretation of Section 17(5)(d) of the CGST Act, 2017.
3. Classification of lifts as either 'plant and machinery' or 'immovable property.'

Issue-wise Detailed Analysis:

1. Eligibility of Input Tax Credit (ITC) on the Purchase of Lifts:
The appellant, a hotel under construction, sought ITC on lifts installed in the hotel, arguing that lifts are used in the course or furtherance of business. The Authority for Advance Ruling (AAR) denied ITC, stating that lifts are part of the building, thus blocked under Section 17(5)(d) of the CGST Act, 2017. The appellant contended that lifts should be classified as 'plant and machinery,' not immovable property, and thus should be eligible for ITC.

2. Interpretation of Section 17(5)(d) of the CGST Act, 2017:
Section 17(5)(d) disallows ITC on goods or services used for the construction of immovable property (other than plant and machinery). The appellant argued that the lift, being a machine, should not be classified as immovable property. They cited Explanation 2 of Section 17(5), which defines 'plant and machinery' and excludes buildings and civil structures. The appellant claimed that the AAR misinterpreted this explanation by concluding that lifts, when installed in buildings, become part of the building.

3. Classification of Lifts as 'Plant and Machinery' or 'Immovable Property':
The appellant argued that lifts should be considered 'plant and machinery' because they are apparatus fixed to earth by foundation or structural support, used for making outward supply of services. They cited several judicial precedents where machinery fixed to earth by nuts and bolts was not considered immovable property. The appellant emphasized that lifts could be installed and uninstalled without damaging the building, thus retaining their movable character.

Discussion and Findings:
The appellate authority reviewed the submissions and found that Section 17(5) of the CGST Act clearly blocks ITC on goods or services used for constructing immovable property, including lifts. The authority noted that the definition of immovable property includes things attached to the earth or permanently fastened to anything attached to the earth. Despite the appellant's arguments and judicial precedents from the pre-GST era, the authority concluded that lifts, when installed in buildings, become part of the immovable property.

The authority also noted that the appellant did not provide any new arguments or evidence that would warrant a different interpretation from the AAR's decision. The judicial citations provided by the appellant were considered but found not applicable in the GST context due to the clear provisions of Section 17(5) of the CGST Act.

Conclusion:
The appellate authority upheld the AAR's decision, concluding that ITC is not admissible on the purchase of lifts as per Section 17(5)(d) of the CGST Act, 2017. The appeal was dismissed, affirming that lifts, when installed in a building, are classified as immovable property, and thus, ITC on their purchase is blocked.