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TMI BlogITC AVAILABLE ON LIFT INSTALLED IN COMMERCIAL BUILDING GIVEN FOR RENTX X X X Extracts X X X X X X X X Extracts X X X X ..... Dear Expert, We have purchased one lift leving gst and installed in building given on rent for commercial purpose. My query is whether GST paid on Lift in Dec.23 will be available till 30th Sept.24 as we have not show this in any gst return till now. Please give your expert opinion. REGARDS, WADHWA - Reply By Shilpi Jain - The Reply = 2 issues here. 1st whether credit of lift is available or not. 2nd time by when this can be availed. You can avail credit up to 30th Nov '24 in any of the GSTR-3B filed by then. 1st query - In my view credit of lift available since it is a P M. - Reply By Sadanand Bulbule - The Reply = Dear querist In my considered view, the ITC is not admissible on purchase of Lift as per the Section 17(5) (d) of the CGST Act, 2017 . - Reply By KASTURI SETHI - The Reply = I agree with the views of Sh. Sadanand Bulbule, Sir Ji. ITC on lift is not admissible because after assembling of the parts of lift i.e. car motor, ropes, rails, shaft, safety system, breaking system etc. and installation of the 'lift' in the building, lift becomes an integral part of the building (immovable property). 'Lift' without building has no existence. 'Lift' is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot covered under the definition of 'plant and machinery. Hence ITC on lift is hit by Section 17 (5) (d) of CGST Act . Explanation given below sub-section 6 of Section 17 may also be read in this context. 'Building' is clearly excluded from the expression, 'plant and machinery'. - Reply By Shilpi Jain - The Reply = Lift is an equipment or machinery. If used for making outward supply, it would be eligible for credit as there is no restriction in law for credit relating to immovable P M. P M credit is eligible under GST even if it pertains to a P M which is immovable . - Reply By KASTURI SETHI - The Reply = (i) Components and parts of 'lift' are assembled (manufactured) at site as per the suitability of the building. Hence Lift becomes an i ntegral part of the building (immovable property). Lift is a tailor made goods as per specific building. Lift cannot operate without building. So 'lift' s independent identity as machinery loses its existence after becoming an integral part of the building and building is excluded from the scope of 'Plant Machinery' as Explanation given below sub-section 6 of Section 17 of CGST Act . (ii) ITC on 'lift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' has been denied in the following decisions of AAR/AARs :- ( Rationale behind denial is worth reading) (a) 2020 (7) TMI 476 - AUTHORITY FOR ADVANCE RULING, MADHYA PRADESH : JABALPUR HOTELS PVT. LTD. (in favour of the department) (b) 2020 (9) TMI 1144 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA: LAS PALMAS CO-OP. HOUSING SOCIETY (in favour of the department) (c) 2022 (11) TMI 390 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA : MAHAVIR NAGAR SHIV SHRUSHTI CO-OP HOUSING SOCIETY LTD . ( in favour of the department) - Reply By Sadanand Bulbule - The Reply = Dear querist Please find the following supplementary points affirming my earlier reply: M/s Kone Elevators vs State of Tamil Nadu (2014 (5) TMI 265 - SUPREME COURT) 1] Lift, being integral part of building is immovable property as this is attached to building for the permanent beneficial enjoyment of the said building and therefore cannot be termed as plant and/or machinery . 2] Further the term Plant Machinery has different meanings under different statutes. So one need to thoughtfully underline the specified meaning given to it under the Explanation annexed to Section 17[5][d] of the CGST Act . It cannot be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpanded to suit the entitlement that is expressly prohibited. 3] Go as per law or else choice is yours to enjoy roller-coaster during adjudication. - Reply By KASTURI SETHI - The Reply = Sh.Sadanand Bulbule Ji, Sir, In support of your reply at serial no.1 dated 03.09.2024 I have traced out a few judgements of Hon'ble Supreme Court in this context and the same are as under : (i) In the case of Triveni Engg. Industries Ltd. v. C.C.E. - 2000 (8) TMI 86 - SUPREME COURT , Hon'ble Supreme Court had held as under:- that after assembling, on completion of process of erection, the item becomes a part of the building or an immovable property. (ii) In the case of Quality Steel Tubes (P) Ltd. v. C.C.E. 1994 (12) TMI 75 - SUPREME COURT Hon'ble Supreme Court had held as under : erection and maintenance of lifts forms part of the immovable property . - Reply By Pradeep Reddy - The Reply = I Agree with Shilpi Madam. The lift can be considered as a plant and machinery as defined under the CGST Act , even if it forms part of a building (immovable property). Therefore, ITC is not barred by 17 (5) . ITC is not barred on immovable property if qualifies as plant and machinery - Reply By Amit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agrawal - The Reply = In my view, ITC against Lift will be available for following reasons: A. Here, I am assuming that subject 'Lift' is shown as separate asset in tax-payer's Balance-Sheet and same is not capitalised under the head 'Building' ( which already has staircase/s ) but shown as separate asset under Plant Machinery ( being 'additional facility' provided to the occupants / tenants of the building ). B. What is blocked u/s sub-clauses (c) (d) of Section 17(5) is ' Construction ' of immovable property. 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 . B. Said Lift is not 'constructed' but assembled / erected at site . And there are difference in the activity of 'construction' assembly / erection as can be seen from definition of works contract services given under Section 2(119) of the CGST Act, 2017 which reads as follows: works contract means a contract for building, construction , fabrication, completion, erection, installation , fitting out, improvement, modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; C. Once tax-payer has NOT received any services of 'construction' but received goods services ( i.e. works contract u/s 2(119) in nature of erection / installation of an immovable property ), there is no question of barring ITC sub-clauses (c) (d) of Section 17(5) . Bar of ITC u/s sub-clauses (c) (d) of Section 17(5) is only for 'Construction' and same is NOT for 'Erection / Installation' . And this view of mine has got nothing to with explanation given after Section 17(6) . D. Moreover, as subject cost is NOT capitalised under the head 'Building' by the tax-payer ( which already has staircase/s ) but shown as separate asset under Plant Machinery in his balance-sheet ( being 'additional facility' provided to the occupants / tenants of the building ), this is another reason NOT to deny ITC using sub-clauses (c) (d) of Section 17(5) . This view of mine is considering 'explanation given after Section 17(5) (d) read with exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation given after Section 17(6) '. In effect, tax-payer got two immovable properties (one is 'Building' other is 'Plant Machinery'). These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Amit Agrawal - The Reply = Another, but much more controversial, issue here is whether 'lift' is a 'immovable property' or not for the purpose of in context of sub- clauses (c) (d) of Section 17(5 ) , specially when entire purpose of such lift is its movement to transport of people / goods from one floor to another. This aspect of controversy much more study before commenting anything in favor of tax-payer. Hence, I left this part while sharing my ex-facie views in earlier post. - Reply By Alkesh Jani - The Reply = Shri, In response to the query raised, I concur with the views expressed by our esteemed experts, Shri Kasturiji Sir and Shri Sadanand Bulbuleji Sir. Their opinions are well-founded and supported by authoritative references. It is important to note that the construction service is considered complete upon the issuance of a No Objection Certificate (NOC) or Building Use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Permission from the relevant authority. Until such approval is obtained, the activity remains classified as a construction service. Furthermore, the installation of a lift is mandatory for buildings exceeding a certain height of civil structure, and it constitutes a common property shared by all members. The lift is an integral part of the building's structure. Therefore, declaration of this expenditure under any head of Accounting will not affect the applicability of Section 17(5) of the CGST Act, 2017 . Thanks, - Reply By Sadanand Bulbule - The Reply = Dear querist Interpretations cannot tinker the well settled law per se. Meaning, all efforts would lead searching for a tiny needle in a haystack. So one should not try to fence the sky. Opinions do change but fact remains unchanged. Entitlement of ITC is based on facts and not on opinions. Good luck. - Reply By Amit Agrawal - The Reply = W.r.t. Para A from my earlier post above and in context of going discussion here, case-law of THE COMMISSIONER OF INCOME-TAX, BANGALORE AND THE DEPUTY COMMISSIONER OF INCOME-TAX, BANGALORE VERSUS M/S. IBC KNOWLEDGE PARK PVT. LTD. AND VICA-VERSA, (2016 (5) TMI 372 - KARNATAKA HIGH COURT) is wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth noting ( even though same related to income tax where Dept. was arguing that 'as elevator / lift is part of building i.e. house property, depreciation cannot be claimed' HC ruled otherwise ): Depreciation in respect of electrical installations, elevators , DG sets installed in the building , which have been let-out by the assessee, which is receiving rental income from the said building - Held that:- The lessee is required to pay not only the rentals on the building but also charges for the facilities provided by the assessee. The facilities and services provided by the assessee are at Annexure 2 to the said agreement. On a conjoint reading, it becomes clear that the rental income is income from house property. But the charges received towards provision and maintenance of facilities and services as per Annexure-2 cannot be construed to be income from house property . The said income, in our view, has to be considered as income from business and therefore, the claim for depreciation has to be allowed , which has been rightly done so by the Tribunal. - Decided in favour of assessee These are ex facie views of mine and the same should not be construed as professional advic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e / suggestion or recommendation. - Reply By Ganeshan Kalyani - The Reply = In books of accounts, the lift is generally capitalized under 'building'. - Reply By KASTURI SETHI - The Reply = Sh.Sadanand Bulbule Ji, This is with reference to your contents expressed at serial no. 12 dated 04.09.2024. Just as a fact always remains unchanged, similarly, dictionary meaning and its essence remains unchanged because English language dictionary is internationally accepted. - Reply By KASTURI SETHI - The Reply = Sh.Ganeshan Kalyani Ji, Pl. refer to your view at serial no.14 above. Any legal backing in support of your view? I am looking forward to your eagerly. - Reply By KASTURI SETHI - The Reply = Pl.read 'your response' instead of 'your' - Reply By VENU K - The Reply = I feel a large number of judicial decisions as well as advance rulings have stressed on the fact that isomething that ultimately becomes an integral part of a building cannot be considered as plant and machinery. A stand alone airconditioner is treated as plant and machinery but a centralised airconditioning plant gets merged with the building and becomes an integral part of building after its installa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Same logic applies to lifts also in my opinion. As other experts have quoted many legal decisions and AAR , I do not venture into the same . After all, in an SCN, the department is just taking an alternate tax position and it has enough materials to support its tax position and confirm the demand. So to what extend first appellate authority or even tribunal will be able to give us relief is a moot question. Anyway any illuminating discussion that takes place is always an occassion for further learning and exchange of ideas. Thank you experts for your scholarly views on the subject. - Reply By KASTURI SETHI - The Reply = Sh. Venu K Ji, (i) What is worth highlighting is that your thoughts are original and not influenced by any expert or any judgement of any court. I term the contents of your article as TEXT and these are in the fitness of things. Logic and reasoning are par excellence. (ii) You have chosen your words very carefully. (iii) Your article has boosted my morale. (iv) Thank you very much your contribution on the issue. - Reply By Sadanand Bulbule - The Reply = Dear querist Legal battle is more preferable than legal adventure. - Reply By KASTURI SETHI - The Reply = Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Sadanand Bulbule Ji, Sir, Will you oblige me by decoding the version posted at serial no.20 dated 06.09.24? I could not grasp it. Thanks a lot. - Reply By Shilpi Jain - The Reply = From all the above discussions u can make out that this is an interpretation issue. If credit amount is big and you are ok to take litigation on, pls proceed to take credit. If u don't do this then do not feel disheartened in case in future u see a favourable HC decision or a circular being issued clarifying that credit is available in this situation. - Reply By Sadanand Bulbule - The Reply = Dear Sh Sethi sir ji I am not expert in decoding. However, law is like sky.It is not possible to see what is beyond sky.Interpretations are like clouds and our standpoint is the basis for formation of interpretation. They appear in different shades,sizes,images and move away.But the sky [facts] remains as it is. So I love the sky most. - Reply By Sadanand Bulbule - The Reply = Dear querist Please refer the following on precisely similar issue: 2024 (9) TMI 298 - APPELLATE AUTHORITY FOR ADVANCE RULING, TAMILNADU - IN RE: M/S. ARTHANARISAMY SENTHIL MAHARAJ - Reply By KASTURI SETHI - The Reply = Sh.Sadanand Bulbul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ji, Sir, I have perused the decision of AAAR posted word for word. The ratio of the decision is applicable to the present issue raised by the querist. - Reply By Amit Agrawal - The Reply = Relying on 'Advance authorities rulings' is to decide any legal issues under GST can be very risky for the tax-payer point of view, as most of these rulings have pro-revenue bias. I never consider these rulings for taking any position on any legal issues. I see them from limited point of view of knowing Dept s stand on any given issue and then, independently, examine issue/s on my own and then, take my call irrespective of what is stated in those rulings ( my views - generally specking - is contrary to these ARR rulings in majority cases). W.r.t. available AAA/AAAR rulings on the subject matter under discussion ( which are quoted by many contributors in earlier posts here ) are grossly faulty in their reasoning wrong application of various Apex Court rulings ( which are also quoted by many contributors in earlier posts here ), in my view. In those Apex Court rulings, issues under consideration were very different ( manufacturing of excisable goods V/s Erection of immovable property, Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of goods V/s Works Contract involving immovable property etc ). And various remarks findings made by Apex Court must be seen from those context only where Court refused to accept Dept s contention/s that activity of erection of lifts amounts to manufacture OR sale of goods. Basic reason behind those decisions is that Erection of Lift amounts to Works Contract ( NOT sale of goods per se) as assembled / erected lift cannot be called as goods (i.e. on principal of movability as essential future of any goods). Similarly, courts in those cases refused to accept Dept s contention that assembled / erected lift can be called as goods manufactured (i.e. again on principal of movability). All court has said that assembled / erected lift is an immovable property (i.e. non-goods) and hence, same cannot be called as Sale of goods per se or manufacturing of excisable goods. All these rulings of Apex court ( which are also quoted by many contributors in earlier posts here ) do NOT have any bearing on subject of issue under discussion here what-so-ever ( i.e. availability of ITC in context of sub- clauses (c) (d) of Section 17(5 ) read with explanations given thereunder ). It is worth noting tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no court till date has decided on the subject issue which is under discussion here and hence, there is zero judicial precedent on this legal issue under discussion here. As reported at 2021 (1) TMI 926 - KARNATAKA HIGH COURT, in case of M/S. KLUBER LUBRICATION (INDIA) PVT LTD VERSUS ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES ZONE-1 , Para 21 is worth noting and same is as follows : It is well settled in law that a decision of the court is only an authority for what it decides and not what can logically be deduced therefrom . It cannot be quoted for a proposition that may seem to follow logically from it and such a mode of reasoning assumes that law is necessarily a logical code, whereas it must be acknowledged that law is not always logical . It is equally well settled legal position, that court should not place reliance on a decision without discussing as to how the factual situation fits in with the fact situation of the decision, on which reliance is placed. [See: DELHI ADMINISTRATION (NCT OF DELHI) VS. MANOHAR LAL, 2002 (8) TMI 851 - SUPREME COURT and HARYANA FINANCIAL CORPORATION VS. JAGADAMBA OIL MILLS , 2002 (1) TMI 1266 - SUPREME COURT ]. It is well settled in law that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations of the courts are neither to be read Euclid s theorems nor as provisions of a statute and should not be taken out of their context . The observations must be read in the context, in which they appear to have been stated . The Judges interpret statutes and they do not interpret judgments . [See: BHARAT PETROLEUM CORPORATION LTD. ANR. VERSUS NR. VAIRAMANI ANR 2004 (10) TMI 576 - SUPREME COURT ). I can quote many more judgements on this, which basically says what is summarized by Karnataka HC above . These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By RaamSrinivasan Kalpathi - The Reply = To play safe, the querist can avail the ITC and reverse the ITC in GSTR-3B in the same month. If there is a favourable ruling later, then the querist is always free to take re-credit and that too without any timelines. Thanks - Reply By Sadanand Bulbule - The Reply = Dear querist Taxman like Shylock is always quenched for his pound of flesh . The twist in the story is not for for a single drop of blood. So taxman has to re-think and taxpayer has to be shrewd like Antonio and Bassanio to ensure that it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot for a drop of blood. This needs intelligent legal advisor and then law works in its own favour. - Reply By KASTURI SETHI - The Reply = Sh.Sadanand Bulbule Ji, Sir, From your views expressed at serial nos. 20 23, inference can be drawn as under : Intellect and insight both will be determinant factors . - Reply By Amit Agrawal - The Reply = As per well settled legal position about how to see and read any judgement of Courts, which is explained by me in earlier post at Sr. No. 26 above, it is clear that remarks / observations made in various quoted SC rulings ( about relationship between lift / elevators with building ) has got no application what-so-ever on subject legal controversy under discussion here. As quoted AAR / AAPR wrongly applied remarks made in those SC rulings, quoted AAA / AAAR (favoring revenue) has got lost even their persuasive values. Now, to take this discussion forwards, let us take at the issue with fresh eyes : A. Clause (c) (d) of Section 17(5) specifically includes 'Plant Machinery' (P M) while blocking ITC. B. P M is explained below Section 17(6) as follows: Explanation. For the purposes of this Chapter and Chapter VI, the expression plant and mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinery means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes - (i) land, building or any other civil structures ; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises. B1. What is excluded from P M is ' building or any other civil structures' and NOT 'building or any civil structures' . Thus, for purpose of exclusion of ITC under clause (c) (d) of Section 17(5) , building is specifically made equivalent to 'a civil structure' nothing beyond. Lift / Elevators are NOT be called as 'Civil Structure' under common parlance . B2. Without prejudice to abov e, Lift can be called as 'permanent fixture of building'. But calling it 'permanent fixture of building' itself means it is otherwise 'separately identifiable immovable property' from 'a civil structure of building'. And, separately identifiable immovable property (i.e. Lifts / elevators) fits perfectly into the explanation defining P M for taking ITC even if it excludes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'buildings'. B2.1 'Fixture' is defined in Oxford Language as follows: a piece of equipment or furniture which is fixed in position in a building or vehicle B3. Thus, what is excluded from P M is 'Civil structure of Building' and NOT P M (i.e. Lift / Elevators' which is installed / erected in such buildings. Summarizing above, I see not any reason why ITC against such lift / elevators cannot be claimed by a tax-payer in subject situation given by the querist. Exclusion from ITC under Clause (c) (d) of Section 17(5) does not apply in given situation in my view. These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Amit Agrawal - The Reply = Please read Para A from my last post above as follows: A. Clause (c) (d) of Section 17(5) specifically excludes 'Plant Machinery' (P M) while blocking ITC against immovable property. - Reply By Amit Agrawal - The Reply = And for very same reasons , I am also of the view that ITC against a 'centralised air-conditioning plant' installed within a the building can also be taken when same is used for making outward supply of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or services or both. And blockage to ITC against 'immovable property' under clause (c) (d) of Section 17(5) does not apply to even such 'apparatus / equipment / machinery which is fixed to earth by foundation or structural support' within a building. These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Amit Agrawal - The Reply = And my views in earlier posts ( i.e. Post at Sr. No. 30, 31 32 read with post at Sr. No. 26 ) will remain the same even if tax-payer capitalized expenses incurred against erection / installation of such lifts / elevators / centralized air-conditioning plant under the head 'Building' in his books of accounts. These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Amit Agrawal - The Reply = Despite my views shared in Post at Sr. No. 34 above without contradicting them in any sense , I would prefer such tax-payer to capitalize expenses incurred against erection / installation of such lifts / elevators / centralized air-conditioning plant under the head 'Plant Machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' in his books of accounts to the extent possible ( i.e. unless and until someone can point out ' specifics ' about applicable accounting standards, applicable provisions of laws like income tax act, companies act rules made thereunder, which does not allow such capitalization under the head 'Plant Machiner y', as I do not deal in those areas professionall y). This is more so, generally specking, when average working life of these 'apparatus / equipment / machinery which is fixed to earth by foundation or structural support' is less than 'Buildings' within which these are erected. If not permitted under income tax act, tax-payer need not claim depreciation against those assets while capitalizing them under the head P M. This steps (i.e. capitalization under P M) will further help tax-payer while defending itself in expected litigation against ITC so claimed . And, IF such steps (i.e. capitalization under P M) are not permitted due to some applicable accounting standards, applicable provisions of other law/s, 'such information reasons' itself can be used to defend ITC ( in addition to grounds taken by me in earliest posts above ) while sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultaneously capitalizing them under the head 'Building' in tax-payer's books of accounts. Either way, I do not see any legally valid reason to deny subject ITC. These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By KASTURI SETHI - The Reply = Only time will tell. - Reply By KASTURI SETHI - The Reply = In continuation of my view at serial no.35, I add that what is legally correct is in the lap of time. - Reply By RaamSrinivasan Kalpathi - The Reply = I specifically refer to the case S afari Retreats Private Limited - 2019 (5) TMI 1278 - ORISSA HIGH COURT , wherein the Orissa HC had allowed ITC by reading down Sec.17(5)(d) for the purpose of interpretation to give benefit to the RTP, whereby it ruled that if ITC is denied on building meant and intended to be let out it would amount to treating the transaction identical to a building meant and intended to be sold. HC further ruled that treatment of these two different types of transactions as one for the purpose of GST, is contrary to the basic principles regarding classification of subject matter of tax levy and, therefore, violative of Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 14 of the Constitution . The Department has filed a SLP before the SC and same has been listed for hearing before a two member bench on 31-Aug-24. Let's wait for the final judgment. In the interregnum I would suggest to the querist to avail ITC in 3B and reverse the same in the same month and await the SC judgment in the case of Safari Retreats. Thanks - Reply By Amit Agrawal - The Reply = Dear Shri RaamSrinivasan Kalpathi Ji, Reversal in ITC u/s 17(5) is 'permanent / absolute in nature' as per Point No. B (read with Point No. C) under Para 4.3 of Circular 170/02/2022-GST . While one can always challenge validity of such circular etc. ( with risk of it being upheld in court in future ), but suggested course of action by you will lead to 'another set of legal challenges from Dept.' that the tax-payer will have to face if he reverses subject ITC now u/s 17(5) and try to re-claim it in distant future after getting favorable court ruling/s in future. With due respect, on net-net basis, I do not see any gain to the tax-payer to reverse subject ITC now u/s 17(5) with hope of re-claiming it in the distant future. Actually, such course of action can lead to loose-lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose situation for the tax-payer (i.e. even when court rules in favor of tax-payer in future on the subject ITC under discussion here). It is better for any tax-payer to take definitive calls now about whether to take subject ITC or not, in my humble view. Of-course, as always the case for every controversial / litigation-prone issue, it is for every tax-payer who has to take these calls 'individually / for himself' depending upon so-many different factors ( such as risk-appetite, quantum involved, willingness to go through judicial process/es costs thereof, professional calibre and past record of his consultant handing complicated cases so on ). These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By RaamSrinivasan Kalpathi - The Reply = In response to the point raised by respected Shri. Amitji, I submit that this correspondent, being a CA, is not in the business of interpretation of statutes. I firmly believe that interpretation is in the realm of advocates, IRS, department officials and doctorates in law. Nonetheless, this correspondent only attempts understand law. Coming to brasstacks - ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a specific column in Form 3B table which has been introduced from August 2023. A separate module for the opening balance pertaining to this table was also provided which was open till Dec, 2023. Table no. 4(B)(2) which allows a RTP to reverse ITC and reclaim it subsequently. There is another ribbon provided below to furnish details of ITC pertaining to previous periods which have been reclaimed. Dept with the help of these 2 modules monitors what has been reclaimed never exceeds what has been reversed. A browse through the latest 3B Returns will through insight into this aspect. Thanks - Reply By RaamSrinivasan Kalpathi - The Reply = More specifically what is suggested to the querist is to reverse the ITC under table 4(B)(2) and then reclaim as when there is a favourable decision and report the same under Table 4(D)(1). Technically, department will not have a case against the querist's client. Format of Table 4 has been pasted from TMI Forms section. 4. Eligible ITC Details Integrated Tax Central Tax State/UT Tax Cess 1 2 3 4 5 (A) ITC Available (whether in full or part) (1) Import of goods (2) Import of services (3) Inward supplies liable to reverse charge (other than 1 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above) (4) Inward supplies from ISD (5) All other ITC (B) ITC Reversed (1) [As per rules 38 , 42 and 43 of CGST Rules and sub-section (5) of section 17 ] (2) Others (C) Net ITC Available (A) (B) (D) [Other Details] (1) [ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax period] (2) [Ineligible ITC under section 16(4) and ITC restricted due to PoS provisions] - Reply By Amit Agrawal - The Reply = IMHO, taking ITC now and then immediately reversing it ( even under table 4(B)(2) ) will amount to 'not-taking ITC' - in given situation under discussion here - for the purpose of Section 16(4) read with Section 41(1) of the CGST Act, 2017 . And re-claiming such ITC in distant future ( i.e. as and when as when there is a favorable decision and report the same under Table 4(D)(1) ) is fraught with legal risks as such ITC taken in future will be treated as time-barred u/s 16(4) read with Section 41(1) ( as, if when detected by Dept. through audit / scrutiny / investigation etc. ) for the tax-payer, IMHO. If tax-payer is such a blind risk-taker (i.e. to take above risks), why not to take ITC now defend such ITC ( as, if when detected by Dept. through audit / scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / investigation etc. as current online system of Dept. does not know nature / classification of ITC so taken and if such ITC is wrongly taken or not ). There is enough legal grounds are available to defend such ITC, if he got good professionals to defend willingness to go through judicial process cost thereof etc., IMHO. And risk of loosing substantially against re-claimed ITC (to be taken in future if favorable court decision comes out) is much much greater as explained above Para/s than taking ITC now and defending it, IMHO. Moreover, just because Dept's current system of online ITC reconciliation does not catch such misuse of the facility to 'Re-claim ITC in genuine situations permitted under law', does not give 'these misuse of facility' a legal sanctity for given situation under discussion here. Hence, I do not see any gain to the tax-payer to reverse subject ITC now u/s 17(5) with hope of re-claiming it in the distant future. Actually, such course of action can lead to loose-loose situation for the tax-payer (i.e. even when court rules in favor of tax-payer in future on the subject ITC under discussion here). It is better for any tax-payer to take definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve calls now about whether to take subject ITC or not, in my humble view, based on factors explained in my earlier post at Sr. No. 38. These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Amit Agrawal - The Reply = Please read relevant line from my last post above as follows: Hence, I do not see any gain to the tax-payer to reverse subject ITC now either u/s 17(5) (i.e. under table 4(B)(1)) or as 'others' (i.e. under table 4(B)(2)) with hope of re-claiming it in the distant future. - Reply By RaamSrinivasan Kalpathi - The Reply = I respectfully agree to disagree with the views of Shri.Amitji. As regards the construction industry every advocate/ CA whom this correspondent had spoken to or had the benefit of hearing their lectures have advocated this option of availing and reversing the credit under Table 4(b)(2) in the same month in R-3B and taking re-credit as when a favourable verdict emanates. Some of the speeches have been put up on you tube also. As already stated this correspondent is not an advocate and only makes an honest attempt to understand law. - Reply By Amit Agrawal - The Reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = Dear Shri RaamSrinivasan Kalpathi Ji, You have every right to disagree with my views and legal reasoning behind them. After-all, majority of contributors on TMI tries his / her best while sharing own views on any controversial issues. And it is for the querist to choose best way forward at his own risk rewards, depending upon various factors to be considered by him. - Reply By Amit Agrawal - The Reply = By the way, I am expecting Apex Court to overrule S afari Retreats Private Limited - 2019 (5) TMI 1278 - ORISSA HIGH COURT . - Reply By Alkesh Jani - The Reply = Dear Experts, Upon reviewing the views shared, I have a few queries that I wish to present for further clarification and discussion. Background: Section 17(1) of CGST Act, 2017 : This section provides that where goods or services (or both) are used by a registered person partly for business and partly for other purposes, the input tax credit (ITC) shall be restricted to the extent attributable to the business purposes. Section 17(6) and Explanation : The term plant and machinery refers to apparatus, equipment, and machinery fixed to the earth by foundation or structural support and used for making outward supply of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or services. It includes such foundation and structural supports but excludes: Land, building, or other civil structures ; Telecommunication towers; Pipelines laid outside factory premises. Furthermore, for clauses (c) and (d), construction includes re-construction, renovation, additions, alterations, or repairs, to the extent of capitalization, to the said immovable property. Definitions: Section 2(107) : Taxable person refers to an individual who is registered or required to be registered under section 22 or section 24 . Section 2(83) : Outward supply for a taxable person refers to the supply of goods or services, whether by sale, transfer, barter, exchange, license, rental, lease, or any other mode in the course or furtherance of business. Query: Is a lift installed in a building considered independent of the civil structure, and does it require capitalization under Section 17 ? If the lift installed is treated as plant and/or machinery, how does it align with the definition of outward supply under the Act? What type of goods or services are deemed to be provided in this context? What would be the appropriate HSN code for the outward supply related to the installation or use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lift? I look forward to your valuable insights and thank you in advance for your guidance on this matter. this query is purely for my knowledge purpose. Thanks again. - Reply By Amit Agrawal - The Reply = Dear Shri Alkesh Jani Ji, I feel that your queries are recycling of 'areas of controversies' involved in the subject matter of ITC and I have already shared by views thereon in series of earlier posts above. Still, let me answer queries raised by you once again: Queries: 1. Is a lift installed in a building considered independent of the civil structure, and does it require capitalization under Section 17? My view: Lift can be called as 'permanent fixture of building'. But calling it 'permanent fixture of building' itself means it is otherwise ' separately identifiable immovable property ' from 'a civil structure of building'. And, separately identifiable immovable property (i.e. Lifts / elevators) fits perfectly into the explanation defining P M for taking ITC even if it excludes 'buildings'. B2.1 'Fixture' is defined in Oxford Language as follows: a piece of equipment or furniture which is fixed in position in a building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or vehicle B3. Thus, what is excluded from P M is 'Civil structure of Building' and NOT P M (i.e. Lift / Elevators) which is installed / erected in such buildings. Kindly refer to my post above at Sr. No. 30 (read with post at Sr. No. 26) for more details . C. Section 17 does NOT prescribe mandatory capitalization of lift under the head 'Building'. Such treatment depends upon applicable accounting standards (along-with income tax other law's provisions (if any)). Kindly refer to my post above at Sr. No. 34 for more details . 2. If the lift installed is treated as plant and/or machinery, how does it align with the definition of outward supply under the Act? What type of goods or services are deemed to be provided in this context? My views: Yes. Nature of supply depends upon 'terms conditions of agreement' with tenant / user of lift, read with Section 2(30) of the CGST Act, 2017 . One of the possibility is explained by me in my posts at Sr. No. 9 read with Sr. No. 13. 3. What would be the appropriate HSN code for the outward supply related to the installation or use of the lift? My views: Nature of supply appropriate HSN Code depends upon 'terms condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of agreement' with tenant / user of lift, read with Section 2(30) of the CGST Act, 2017 . These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Alkesh Jani - The Reply = Dear Shri Amitji, Thank you for your prompt and insightful response. Based on your explanation, I have summarized the key points as follows: The lift qualifies as Plant and Machinery under the applicable definition. It is independent of the civil structure or building and is considered separate immovable property. There is no requirement to capitalize the lift in the books of account. The nature of outward taxable supply can be determined by the terms of the agreement between the tenant/user of the lift. However, I would like to seek further clarification on a few additional queries: Since a lift is not classified as machinery, should it be treated as Plant ? If we categorize it as Plant, does it cease to be considered immovable property since Plant is recognized as Goods under the Act? In such a case, do we treat the lift as goods ? In the absence of a specific contract, can the outward supply of the lift be interpreted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service of carrying passengers? In such a scenario, would the taxable value be determined by fees charged for transporting passengers from the ground floor to the desired floor? can the lift service be free for members but chargeable for visitors? If capitalization of the lift is not required, would it still fall within the ambit of input for the purpose of claiming input tax credit (ITC)? If no charges or consideration are received from either members or visitors, can we classify the use of the lift as being outside the definition of Supply under the CGST Act ? If so, how would input tax credit be claimed in such a case, considering there is no supply for which the ITC can be utilized? On basis of which documents, (invoice or debit note) ITC can be claimed? I am seeking clarity on these aspects for my future reference and knowledge, as it may help me handle similar cases more effectively. Thank you in advance for your guidance and insights. - Reply By Amit Agrawal - The Reply = Dear Shri Alkesh Jani Ji, As desired, I am answering points raised in your last post ( I am reproducing your entire post below in italics, putting my views in straight-line ). Some points are repeated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n my answers and same are lengthy in nature ( my apologies in advance for the same). This is due to the fact that you have raised multiple questions which are overlapping in nature ( some are open ended or with wrong / incomplete understanding of what I stated above) and I wanted to answer every question independently very detailed manner: Thank you for your prompt and insightful response. Based on your explanation, I have summarized the key points as follows: The lift qualifies as Plant and Machinery under the applicable definition. - Yes, as per explanation given below Section 17(6) read with 'sub-clause (c) (d) of Section 17(5) explanation given thereunder'. It is independent of the civil structure or building and is considered separate immovable property. I never said that lift is independent of building (i.e. lift has independent existence from building ). What I said that ( in context of discussing ITC against Lifts ) that 'remarks / observations made by Apex court in various rulings' (which are quoted by other contributors above in multiple posts) has no relevance what-so-ever for determination of subject issue under discussion here. For that, I quoted well-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled position of law about to read and treat any judgement as judicial precedent in my post at Sr. No. 26 above and further explained my views about its plications for issue under discussion here in my post at Sr. No. 30 above. Now, coming back to issue under discussion here (i.e. ITC against lifts), I only said that lift has 'separately identifiable immovable property' from 'a civil structure of building'. Without prejudice , I would further add now here that lifts / elevators are separately identifiable immovable property' even within overall building in common parlance (For example: Brake-down / Collapse of lift in a accident is NOT equated with Break-down / Collapse of Building in common parlance ). And, hence, such 'separately identifiable immovable property' (i.e. Lifts / elevators) fits perfectly into the explanation defining P M for taking ITC even if it excludes 'buildings' per se. Please see my post at Sr. No. 30 above for more details. There is no requirement to capitalize the lift in the books of account. I never said that. I only said that whether same should be capitalized either under the head 'Building' or 'P M' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be looked into as per applicable accounting standards ( IT Co. law provisions, as if applicable). And I prefer capitalization of lift under head P M ( though same is not compulsory for my views about ITC eligibilit y) if there is no bar to do so ( nobody till date, could point out ' specifics ' to me barring such treatment ). I wish to again point to my post at Sr. No. 34 above for more details. The nature of outward taxable supply can be determined by the terms of the agreement between the tenant/user of the lift. What I said was that 'Nature of supply depends upon 'terms conditions of agreement' with tenant / user of lift, read with Section 2(30) of the CGST Act , 2017 . ' Kindly allow me further elaborate what I said. There are different practices followed in the industry in this regard. One of the possibilities is explained by me in my posts at Sr. No. 9 read with Sr. No. 13. Other practice in the industry, which I am well aware of, is that there are separate entities ( individual owners of property like shops / premises / entire are floor etc. ) providing rental services and 'common facilities ( like lift operation maintenance, security, DG b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack up so on )' are provided by society (or builder, if society is not yet formed) having over-all ownership / possession control of building per se. Even if owner of multiple premises ( i.e. shops / offices / individual floors ) in a building and entire building as a whole is one same person, such arrangement ( separate charge for common facilities i.e. in addition to lease / rental charges ) is perfectly legal and regularly followed in the industry in their natural course of business. However, I would like to seek further clarification on a few additional queries: Since a lift is not classified as machinery, should it be treated as Plant ? If we categorize it as Plant, does it cease to be considered immovable property since Plant is recognized as Goods under the Act? In such a case, do we treat the lift as goods ? Question is not relevant from GST point of view in context of sub-clause (c) (d) of Section 17(5) and classification of 'lift' between 'machinery plant' is irrelevant for my views. There is only one term used 'Plant Machinery' there which is also an immovable property. If lift per se is 'goods' ( which it is not ), then, there is no n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed for this on-going lengthy debate at all as exclusion from ITC under sub-clause (c) (d) of Section 17(5) will not apply to movable goods . Furthermore, I do not see any provision under GST law which says 'plants' has to be movable thereby goods. In the absence of a specific contract, can the outward supply of the lift be interpreted as the service of carrying passengers? In such a scenario, would the taxable value be determined by fees charged for transporting passengers from the ground floor to the desired floor? can the lift service be free for members but chargeable for visitors? My views are not based on supplies made to third parties like visitors etc. or some fancy structuring of subject transaction i.e. renting. Provision of Lift with its operation maintenance (plus other common facilities (if any) like DG back up, security son on) is facility provided by owner to tenant along-with possession usage of its premises (say, individual offices / shops / entire floor etc.) and these premises are in turn from part of larger building. Once agreement states so ( w.r.t. situation like there is no specific agreement, which is unlikely because same is legally binding from sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mp duty / other laws. Moreover, any tax-payer who is willing to defend ITC following judicial process, should be also willing to keep proper records (i.e. agreement etc.) as it is responsibility of tax-payer claiming ITC to prove supporting factual position in support ), then, it does not matter if owner charges separately for lift usage its maintenance or same is included in 'rental / lease charges'. This is in view of Section 2(30) of the CGST Act , 2017 and same fulfils requirements of explanation to the effect that lift/s are used for making outward supply of goods or services or both (for explanation given u/s 17(6) ). Composite supply of renting of premises (i.e. shop / individual office/s / entire floor) along-with common facilities like provision of lift ( its operation maintenance etc.) are two different supplies which are naturally bundled with each other where renting of premises is principal supply. This does NOT mean that lifts are NOT used for making outward supply as Section 8 of the CGST Act , 2017 cannot be used to deny the fact that under composite supply, two or more supplies are always provided by the supplier which are naturally bundled with each other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 2(30) and there is no compulsion under GST Law that composite supply cannot be for single consideration . As far as industry practice goes in any large commercial complexes / malls etc, there is always separate charge (in addition to rentals) for 'common facilities (such as lift and its operation maintenance, security, DG sets etc') and this practice of rental-agreement is preferred ( though not compulsory for views about ITC against lifts ) wherever tax-payer intents to avail ITC against lift. If capitalization of the lift is not required, would it still fall within the ambit of input for the purpose of claiming input tax credit (ITC)? I never said that. I only said that whether same should be capitalized under the head 'Building' or 'P M' should be looked into as per applicable accounting standards ( IT Co. law provisions, as if applicable). And I prefer capitalization of lift under head P M ( though same is not compulsory for my views about ITC eligibilit y) if there is no bar to do so ( nobody till date, could point out ' specifics ' to me barring such treatment ). I wish to again point to my post at Sr. No. 34 above for more details. If no c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges or consideration are received from either members or visitors, can we classify the use of the lift as being outside the definition of Supply under the CGST Act ? If so, how would input tax credit be claimed in such a case, considering there is no supply for which the ITC can be utilized? - There is no supply without any consideration involved here. Lift is a facility provided by owner to tenant along-with possession usage of its premises (say, individual offices / shops / entire floor etc.) and these premises are in turn form part of entire building. Once agreement states so , then, services of provision of lift ( its operation maintenance) (plus other common facilities, if any, like DG back up, security on on) is part of 'composite supply u/s 2(30) of the CGST Act , 2017 ' from owner to tenant where renting of premises / shops will be principal supply. This does NOT matter if contract does not show separate consideration for such supply by way of services of provisions of lift ( its operation maintenance) or not. Showing no separate consideration in the agreement does NOT mean that there is no consideration for provision of lifts its operation maintenance etc. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also in view of Section 2(30) of the CGST Act , 2017 and same fulfils requirements of explanation to the effect that lift/s are used for making outward supply of goods or services or both and there is no compulsion under GST Law that composite supply cannot be for single consideration . As far as industry practice goes in any large commercial complexes / malls etc, there is always separate charge (in addition to rentals) for 'common facilities (such as lift and its operation maintenance, security, DG sets etc') and this practice of rental-agreement is preferred ( though not compulsory for views about ITC against lifts ) wherever tax-payer intents to avail ITC against lift. On basis of which documents, (invoice or debit note) ITC can be claimed? Please see Section 16(2)(a) of the CGST Act , 2017 read with Rule 36 of the CGST Rules, 2017 . These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation. - Reply By Alkesh Jani - The Reply = Dear Shri Amitji, Thanks for your prompt reply. Thanks Again - Reply By Sadanand Bulbule - The Reply = Dear all ITC on lift -- tsunami of divergent researched opinions are runni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in parallel on the same query. The effect is, there is no unanimity on legal position. I feel this bitter truth really is stranger than fiction. Democracy guarantees freedom of expression. Everyone has to respect it. - Reply By KALLESHAMURTHY MURTHY - The Reply = Dear all Experts, Installation of the lift in the building is not eligible to avail ITC since it is treated as part of immovable property. It is blocked u/s 17(5) (d). During the VAT period also, there were cases of ITC disallowance. With regards. - ITC AVAILABLE ON LIFT INSTALLED IN COMMERCIAL BUILDING GIVEN FOR RENT - Query Started By: - S.C. WADHWA Dated:- 3-9-2024 Last Replied Date:- 18-9-2024 Goods and Services Tax - GST - Got 52 Replies - GST - Discussion Forum - Knowledge Sharing, reply post by an expert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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