Lift is not a machine, it is part of Building, is it true? Is the ITC claimable on the purchase of Lift? Let us discuss whether the lift is a machine or Building only we would reach to the conclusion of ITC is eligibility. Section 17(5) blocks credit of works contract and goods or services received by a taxable person for construction of an immovable property (other than plant and machinery). If the lift is part of the building and it constitutes immovable property ITC is not available means block credit U/S 17. Let us discuss the issue in detail.
A) The word plant and machinery is defined
in explanation to section 17 as "the expression "plant and machinery" 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 and any other civil structure
ii] telecommunication tower
iii] pipeline laid outside the factory
B) as per Oxford References "The equipment required to operate a business.
Capital allowances are available for plant and machinery although neither is defined in the tax legislation. This defines plant and machinery as "whatever apparatus is used by a businessman for carrying on his business - not his stock in trade which he buys or makes for resale: but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in the business. Subsequent cases have been largely concerned with the distinction between plant actively used in a business, and so qualifying for capital allowances, and expenditure on items that relate to the setting up of the business, which does not so qualify".
C) Definition under legal dictionaries:
As per Law Lexicon. "Plant" means the fixtures, machinery, tools, apparatus, appliances etc., necessary to carry on any trade or mechanical business, or any mechanical operation or process.
As per Law Lexicon, "Machinery" means something more than a collection of ordinary tools. It means more than a solid structure built upon the ground, whose parts either do not move at all or if they do move, do not move the one with or upon the other in interdependent action with the object of producing a specific and definite result
Eligibility of ITC
The company is eligible for the input tax credit as per provisions contains in section 16 of the CGST Act, 2019.
However certain credits of the company related to construction activity arc blocked as per section 17(5)(d) of CGST Act 2017 which specifies "goods or services or both received by a taxable person for construction of an
immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business
Section 17(5)(d) of CGST Act 2017 also blocks credit of only construction of immovable property other than plant or machinery, hence it is the clear intent of the law makers that they do not wish to block credits of plant or machinery.
Thus, the intent of the legislature is clear to the extent that it intends to restrict input tax credit on any goods or services which are used or intended to be used in the construction of an immovable property, even when such goods or services or both are used in the course of furtherance of business. We don't see any ambiguity in the words of the statute to this extent. We feel that the applicant is also on the same page with us that any goods or services used in the construction of immovable property shall not qualify for the input tax credit.
Further, a lift comprises of components or parts (goods) like lift car motors, ropes. rails, etc. and each of them has its own identity prior to installation and they are assembled/installed to create the working mechanism called lift. The installation of these components/parts with immense skill is the rendition of service and without installation in the building, there is no lift. Lifts are assembled and manufactured to suit the requirement in a particular building and are not something sold out of shelf and, in fact, the value of goods and the cost of the components used in the manufacturing and installation of a lift are subject to taxation while the element of labour and service involved cannot be treated as goods. Parts of the lift are assembled at the site in accordance with its design and requirement of the building which may include the floor levels and the lift has to open on different floors or otherwise depending upon the requirement. It has to synchronize with the building and each door has to open on the level of each floor
The lift, therefore, 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 and 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.
To set to rest the disputes regarding the definition of the Plant, in light of the fact that input tax credit of works contract services, goods and services received as input for construction of immovable property on own account has been specifically put under the Blocked Credit list with the rider that it shall not apply to plant and machinery, it was incumbent that there should be clarity regarding classification of buildings and civil structures that were hitherto been classified as 'Plant'.
Accordingly, in the explanation relating to Plant and Machinery, beneath subsection (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 structure 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
This case was decided in advance ruling of Jabalpur Hotels P Ltd In re Madhya Pradesh
On the contrary, we find that the identical issue has been decided by the learned Authority for Advance Ruling. Karnataka in the matter of M/s. Tarun Realtors (P.) Ltd. Bangaluru vide order dtd.30-9-2019.
We hold that the applicant in the instant case shall not be entitled to avail input tax credit of tax paid on procuring the lift to be installed in the hotel building which in turn is intended to be used for providing taxable service, in terms of section 17(5)(d) of the CGST Act 2017.
Thus it hold that lift is building not plant and machinery and not eligible for ITC under section 17[d] of the CGST Act,2017.