The Maharashtra Appellate Authority of Advance Ruling (AAAR) in its recent ruling has upheld the order of Maharashtra AAR and ruled that no Input Tax Credit (ITC) can be claimed on lift installation charges in terms of section 16(2)(b) read with section 17(5)(c) and 17(5)(d) of the CGST Act, 2017.
Facts of the case:
- The applicant, M/s. Las Palmas Co-operative Housing Society Limited is a Co-operative Housing Society.
- Appellant is recovering an amount, from each of the society members under various heads such as Service Charges. Electricity Charges, Lift Charges, Ground Rent, Sinking Fund, Repair Fund, Water Charges, Parking Charges, etc., and paying 18% GST on it.
- The Appellant is under the process of replacing existing lift of the society for which a Contract has been awarded to M/s. Fujitec India Private Limited. The Appellant is also recovering a separate amount for replacement of lifts from the members, apart from the normal charges as stated above as contribution for installation of new lifts and charging 18% GST on it to the members of the society.
- The Appellant is recovering such an amount of contribution for the installation of the new lifts under the separate Tax Invoice. The Appellant wanted to know about the eligibility of Input Tax Credit on the lift Installation Charges paid to Fujitec.
Application filed before AAR:
The Appellant had filed an application before the Maharashtra AAR, on the issue whether the Applicant / Appellant is eligible for the input tax credit of lift installation charges paid to Fujitec if it is booked as Capital expenditure in their books without availing the depreciation on 18% GST charged by Fujitec.
Their contention was that lift is a plant and machinery and not an immoveable property and thus not hit by provision of blocked credit under Section 17(5)(d) of the CGST Act, 2017.
Ruling of Maharashtra AAR:
The Maharashtra AAR held that the Appellant was not entitled for the input tax credit of lift installation charges for replacement of lift, attributing to fact that the lift when erected, installed and commissioned in a building, would be construed as an integral part of the building and hence the same will be treated as immoveable property. Accordingly the AAR, went on to decide that the input tax credit in respect of the charges paid to the lift contractor were not admissible to the Appellant in terms of section 17(5)(d) of the CGST Act, 2017.
Aggrieved with the order of AAR, appeal before Maharashtra AAAR was filed by the Appellant.
Contention of the Appellant:
- The Appellant contended before AAAR that lift is a plant and machinery and not immoveable property and thus not hit by provision of blocked credit under Section 17(5)(d) of the CGST Act, 2017.
- It was further contended by Appellant that they are providing work contract services to its members and thus would be eligible to avail ITC as per exception clause of Section 17(5)(c) of the CGST Act, 2017.
Order of Maharashtra AAR: Deliberation and Ruling
- We are completely in agreement with the finding of AAR to the extent that lift / elavator would be construed as an integral part of the immovable property i.e. in this case , the building, in which such lifts or elevators are being installed and commissioned , in view of Apex Court judgment in the case of Triveni Engineering Industries Ltd Vs. CCE , 2000 (40) RLT 1 (SC)-2000 (120) E.I.T.273, which has been relied upon by the AAR to arrive at the above said conclusion.
- Once it has been established that the lift, after its erection, installation and commissioning , would be considered as part of building, and hence immovable property, the Appellant cannot claim ITC on the input services in terms of the provisions laid down under Section 17(5)(d) of the CGST Act, 2017.
- Society itself is not a works contract service provider , nor is it in the business of work contract services. It has not provided work contract services to the members. If the society is not itself a provider of the service there is no question of any ITC on input service. The work contract service (lift installation) is received by the society for the common benefit of the members. Therefore we do not agree with the contention of the appellant that they are covered by the exception provided in Section 17(5)(c) of the CGST Act, 2017.
In view of above deliberations the Maharashtra AAAR consisting of Sanjeev Kumar and Rajesh Kumar Sharma upheld the AAR’s order and ruled that the Appellant will not be eligible to avail the ITC in respect of the GST paid on lift installation charges paid to the lift contractor, in terms of section 16(2)(b) read with section 17(5)(c) and 17(5)(d) of the CGST Act, 2017.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
