2020 (7) TMI 476 - AAR - GST

Input tax credit denied for lifts installed in hotel building due to integration with building structure

In Re: M/s. Jabalpur Hotels Private Limited

The authority ruled that the input tax credit on lifts procured and installed in the hotel building is not available to the applicant as the lifts become ... Input tax credit - Purchase of Lift - credit available to Hotel or not - it has been used in the course or for the furtherance of business - HELD THAT:- The lift becomes part of the building and is not a separate thing per se. A lift does not have an identity when removed from the Building. Therefore, the lift cannot be said to be separate from a Building. Also, it has to be borne in mind that a lift is not an item that is purchased an sold. It is a customized mechanism for transportation, designed to suit a specific building. Upon piece by piece installation, it becomes an integral part of the building. In the explanation relating to Plant and Machinery, beneath sub-section (6) of Section 17, while providing the meaning of the term plant and machinery, it has been clearly stated that Buildings and Civil Structures shall not be covered under the term Plant. However, while so clarifying, it has been accepted and understood that plant and machinery many a times requires support structure and / or foundation for installation and cannot work otherwise. Thus, civil structures and foundation as supporting structure for fastening of plant and machinery to earth has been included as part of plant and machinery. In the instant case, the lift has become part of the building and thus falls under the exclusion from plant and machinery and accordingly, we do not find any reason to interfere with the clear provisions of statute. The input tax credit of tax paid on Lifts procured and installed in hotel building shall not be available to the applicant as the same is blocked in terms of Section 1 of the CGST Act 2017, become an integral part of the building. Issues Involved:1. Eligibility of Input Tax Credit (ITC) on the purchase of lifts used in the construction of a hotel.Issue-wise Detailed Analysis:1. Eligibility of Input Tax Credit (ITC) on the purchase of lifts used in the construction of a hotel:Applicant's Contentions:The applicant, M/s Jabalpur Hotels Private Limited, sought an advance ruling on whether the input tax credit on the purchase of lifts would be available as they are used in the course or furtherance of business. The applicant argued that the lifts should be classified as 'plant and machinery' and thus should not fall under the blocked credit provisions of Section 17(5)(d) of the CGST Act, 2017. They contended that lifts are essential for the operation of a multi-storied hotel and are capitalized in the company's books, with depreciation charged as per the Income Tax Act, 1961. The applicant also cited various judicial pronouncements from the pre-GST era to support their claim that lifts should be considered as part of 'plant and machinery' and thus eligible for ITC.Department's Viewpoint:The department argued that under Section 17(5)(d) of the CGST Act, 2017, no input tax credit is eligible on lifts in this case as they are used in the construction of an immovable property.Authority's Findings:The authority examined the provisions of Section 17(5)(d) of the CGST Act, 2017, which clearly states that input tax credit shall not be available for goods or services received for the construction of an immovable property (other than plant and machinery) on one's own account, even if used in the course or furtherance of business. The authority noted that the applicant's argument to classify lifts as 'plant and machinery' was to avoid the blocked credit provision. However, the authority emphasized that lifts, once installed, become an integral part of the building and thus fall under the definition of immovable property.Legal Interpretation:The authority clarified that lifts are assembled and installed in the building, making them part of the immovable property. The explanation under Section 17(6) of the CGST Act, 2017, includes foundation and structural support for plant and machinery but excludes buildings and civil structures from the definition of 'plant and machinery.' Therefore, the lift, being part of the building, does not qualify as 'plant and machinery' and falls under the blocked credit provisions of Section 17(5)(d).Judicial Precedents:The authority considered judicial precedents cited by the applicant but found them not applicable as they pertained to the pre-GST era. The authority also referred to a similar ruling by the Authority for Advance Ruling, Karnataka, which held that lifts used in the construction of immovable property do not qualify for ITC.Ruling:The authority ruled that the input tax credit on lifts procured and installed in the hotel building is not available to the applicant as the lifts become an integral part of the building and fall under the blocked credit provisions of Section 17(5)(d) of the CGST Act, 2017.Conclusion:The ruling emphasized that the input tax credit on lifts used in the construction of a hotel building is blocked under Section 17(5)(d) of the CGST Act, 2017. The lifts, once installed, become part of the immovable property and do not qualify as 'plant and machinery.' The ruling is subject to the provisions under Section 103(2) and can be declared void under Section 104(1) of the GST Act.