INPUT TAX CREDIT (ITC) IN RESPECT OF LIFTS/ELEVATOR INSTALLTED IN CO-OPERATIVE HOUSING SOCIETY

[Ganeshan Kalyani]

Applicant

M/s. LAS PALMAS CO-OPERATIVE HOUSING SOCIETY LIMITED [2020 (2) TMI 497 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA], a registered taxpayer in Mumbai has applied for Advance Ruling u/s 97 of the CGST Act, 2017. The question involved was whether the applicant can claim input tax credit of the tax paid on the purchase of lift/elevator to be installed and commissioned in their society building.

The applicant collects maintenance from its society member by charging GST. The applicant wants to claim credit of the tax paid on purchase of lift/elevator so as to offset against the GST payable on maintenance charges.

Fact:

The applicant plans to replace the existing LIFT/ELEVATOR of their society building along with its supporting structures. For that purpose the applicant enter into contract with the supplier of lift/elevator on the basis of a lump sum contract price.  The contract entered with the applicant will be considered as 'works contract' service because it will involve high technical skill, knowledge and experience of mechanical and electrical as well civil engineering including preparation of designs, drawings and compliance with engineering specifications and knowledge of lift codes, standards and safety requirements and other regulations prescribed by the Government and other authorities in this behalf.

Applicant's view on ITC eligibility

The applicant is of the view that the GST paid on purchase of lift /elevator can be claimed and offset against the GST payable on the maintenance charges collected from their members. The applicant refers to the provision of section 16(1) and section 17(5) of CGST Act, wherein the credit is allowed on plant and machinery. The applicant considers the lift/elevator as 'equipment' which falls under 'Plant and machinery' and since plant and machinery is excluded from the blocked credit section the input tax credit is rightly eligible.

Observations by Bench

The erection of the lift/elevator can be done only inside the building structure as an integral part of the building in which the lift is to be installed. Once the lift is installed and commissioned in the building, it becomes integral part of the immovable property i.e. the building. The lift when installed in the building makes the building fit for occupation and becomes a permanent fixtures of the building itself. Hence the same would be considered as an immovable property and not 'plant and machinery'.

Case laws cited:

The Hon'ble Apex Court in the case of M/s. Triveni Engg. Industries Ltd Vs CCE, [2000 (8) TMI 86 - SUPREME COURT] clearly laid down that after assembling, on completion of process of erection, the item becomes a part of the building or an immovable property.

In the case of M/s. Quality Steel Tubes (P) Ltd., Vs CCE, UP, [1994 (12) TMI 75 - SUPREME COURT] it was held by the Apex Court that Erection and Maintenance of the lifts form part of the immovable property.

In the case of M/s. Otis Elevator Company [1981 (7) TMI 70 - GOVERNMENT OF INDIA], it was 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 property...'

Bench's view

In view of the above, we have no doubt that the lift/elevator would become an immovable property after being erected and installed, as it is attached to be building itself. Section 17(5) of the Act, restricts input tax credit on civil structures. When any person speaks of such building, he also includes the lifts as an integral part of the building, like storage water tanks, etc.

Hence, supply, installation and commissioning of lifts/elevators by the supplier at the society's premises is in the nature of works contract activity which results in creation of an immovable property. Hence, the bench is of the view that the applicant is not entitled to ITC of GST paid on reimbursement of existing lift/elevator in its premises.

Order (Reply to the applicant's query)

The advance ruling order has been passed on 22.01.2020 under reference no. GST-ARA-31/2019-20/B-13.

Question 1: Whether the applicant, a Co-operative Housing Society paying Goods and Services Tax (GST) on Maintenance Charges collected from its Members, shall be entitled to claim Input Tax Credit of GST paid on replacement of existing lift/ elevator at its own premises to the vendor registered under the Goods and Service Tax Act for manufacture, supply, installation and commissioning of lift/elevator?

Answer: Answer is the negative.

Question 2: Whether the Input Tax Credit, if available; is not covered under blocked credits under the Goods and Services Act.

Answer: Not answered in view of answer to Question No.1 above.

Appeal

An appeal against this advance ruling order shall be made before The Maharashtra Appellate Authority for Advance Ruling for Goods and Services Tax, 15th Floor, Air India building, Nariman Point, Mumbai - 400021.  

Discussions to this article

[KASTURI SETHI]

Sir,

If the cost of elevator is not capitalized and shown as revenue expenditure then ITC can be availed. Am I right ?

[Ganeshan Kalyani]

Reproducing explanation to section 17(5)(c) & (d).

Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

If the lift /elevator is not capitalised in the books of accounts then the input tax credit is allowed. I agree with you Sri Kasturi Sir.

[SHARAD ANADA]

Does lift as revenue expenditure be allowed as deduction under Income Tax Act? And if later on department disallow this capital expenditure (as per income tax act) as deduction then in that case benefit of depreciation is in doubt. In my personal view it's better not claim ITC and claim depreciation on entire amount.

[CAVenkataprasad Pasupuleti]

We can say it as 'plant & machinery' and come out of restriction u/s. 17(5) and take ITC.

[KASTURI SETHI]

There is a legal force in the view of Sh.Venkatprasad. This decision is fit for filing an appeal with AAAR.