Can ITC of GST paid on the installation of lift be claimed?

Recently, the AAR (Maharashtra) in the case of Las Palmas Co-operative Housing Society Ltd.  has held that Input Tax Credit ('ITC') of GST paid on replacement of existing lift/ elevator at its premises is restricted in terms of Section 17(5) of the CGST Act.

In this case, the taxpayer is a Co-operative Housing Society registered under the Maharashtra Co-operative Housing Society Act. It provides various services to its members and charges maintenance fees under different heads and discharges GST on the said bills. The taxpayer has proposed to replace the existing lift along with its structures. Thus, the taxpayer entered into a contract with the supplier for manufacture, supply, installation, and commissioning of lift.

The taxpayer approached the AAR to confirm whether it can claim the ITC of GST paid on replacement of the existing lift. During the course of hearing, the taxpayer contended as under:

• As per P. Ramanatha Aiyar's Advanced Law Lexicon and existing legal provision of GST law, the manufacture, supply, installation, and commissioning of lifts is like 'works contract' as per Section 2(119) of the CGST Act and thereby a composite of services in terms of Clause 6 of Schedule II of the CGST Act; 
  
• Further, it was stated that lift is 'equipment', which shall be fixed to the earth by foundation used for making outward supply of services to its members. The term 'equipment' falls within the definition of 'plant & machinery' as per explanation to Section 17 of the CGST Act; and
• Plant and machinery are not covered under the restrictions under Section 17, and therefore, ITC of GST charged on replacement of existing lift can be availed.

After considering the various provisions/rule of GST law, the AAR observed as under:

• The erection of the lift can be done only inside the building structure as an integral part of the building in which installation of the lift will be done. The erection of a lift has to be custom-made to meet the needs and requirements of a particular building. Once the lift is installed in the building, it becomes an integral part of the immovable property, which is, the building; 
• The lift, when installed in the building, makes the building fit for occupation and becomes a permanent fixture of the building itself. Hence the same will be considered as an 'immovable property';
• The AAR relied upon following judicial precedents which provide that lift may fall within the meaning of 'immovable property':
  
  
  • The Supreme Court, in the case of Triveni Engineering Industries Ltd. [2000 (8) TMI 86], had clearly laid down that after assembling, on completion of the process of erection, the item becomes a part of the building or immovable property.
  • Further, the Supreme Court, in the case of Quality Steel Tubes (P) Ltd. [1994 (12) TMI 75], has held that erection and maintenance of the lifts form part of the immovable property.

• As per explanation to Section 17(5) of the CGST Act, the term ‘plant and machinery' excludes land, building, or any other civil structure. Since after erection and installation, the lift becomes an integral part of the building and it is not covered under 'plant and machinery'; and
• Considering the above, it can be inferred that the lift would become an 'immovable property' after being erected and installed, since it is a part to the building itself.

Based on the above, the AAR held that the taxpayer is not entitled to claim ITC of GST paid on replacement of the existing lift. 

It is to be noted that the Supreme Court, in the case of Kone Elevator India Pvt. Ltd. [2014 (34) STR 641], has held that the activity of supply and installation of lift is a works contract and it cannot be regarded as sale of goods under the erstwhile VAT or sales tax law, however, whether the erection and installation of lift results in an immovable or movable property was not evaluated in this case. 

Hence, it requires to be examined as to whether a lift is an immovable property (i.e., part of a building) or whether it could be regarded as 'plant and machinery'.

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ⁱOrder no.: GST-ARA-31/2019-20/B-13 dated 22 January 2020