ITC AVAILABLE ON LIFT INSTALLED IN COMMERCIAL BUILDING GIVEN FOR RENT

[S.C. WADHWA]

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

[Shilpi Jain]

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.

[Sadanand Bulbule]

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.

 

[KASTURI SETHI]

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 not 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'.

[Shilpi Jain]

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 .

[KASTURI SETHI]

(i) Components and parts of 'lift' are assembled (manufactured) at site as per the suitability of the building. Hence Lift becomes an integral 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' 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)

[Sadanand Bulbule]

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 expanded to suit the entitlement that is expressly prohibited.

3] Go as per law or else choice is yours to enjoy roller-coaster during adjudication. 

[KASTURI SETHI]

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 ofTriveni 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".

[Pradeep Reddy Unnathi Partners]

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

[Amit Agrawal]

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, modification, 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 explanation 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.

[Amit Agrawal]

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. 

[Alkesh Jani]

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 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,

[Sadanand Bulbule]

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.

[Amit Agrawal]

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 worth 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 advice / suggestion or recommendation.

[Ganeshan Kalyani]

In books of accounts, the lift is generally capitalized under 'building'.

[KASTURI SETHI]

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.

[KASTURI SETHI]

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.

[KASTURI SETHI]

Pl.read 'your response'  instead of 'your'

[VENU K]

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 installation. 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.

[KASTURI SETHI]

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.

[Sadanand Bulbule]

Dear querist

 Legal battle is more preferable than legal adventure.

AI Summary

Input tax credit availability for lifts in rented commercial buildings turns on plant-or-machinery character and functionality test. The central issue is whether ITC on GST paid for a lift installed in a rented commercial building is blocked as part of immovable property or is allowable because the lift qualifies as plant or machinery or a separately identifiable asset used to make outward supplies. Opinions diverge: some authorities and rulings treat lifts as integral to the building and deny credit; others rely on statutory definition, accounting treatment, contractual terms and the functionality of the asset to support ITC. Recent Supreme Court guidance applying a functionality test may expand circumstances in which ITC can be sustained, but entitlement remains fact-sensitive and advisedly supported by documentation and specialist advice.