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20 February 2020

No ITC on supplies used for replacement of existing lift/ elevator

Section 17(5) of the CGST Act, 2017 provide a list of supplies in respect of which ITC is blocked. This list includes works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further her supply of works contract service. Further, goods or services received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account or even when it is used in the course or furtherance of business cannot be claimed as input tax credit. 'Construction' is deemed to include re-construction, renovation, additions or alterations or repairs.

The Authority for Advanced Ruling ("AAR") West Bengal was faced with the question as to whether the Applicant-a Co-operative Housing Society paying Goods and Services Tax(GST)on Maintenance Charges collected from its Members, shall be entitled to claim Input Tax Credit of GST paid on replacement of existing lift/elevator at its own premises to the vendor registered under the Goods and Services Tax Act for manufacture, supply, installation and commissioning of lift/ elevator?

The authority observed that once the lift is installed and commissioned in the building, it becomes integral part of the immovable property i.e. 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.

Reliance has been placed on judgment of hon'ble Apex Court in the case of Triveni Engg. Industries Ltd. vs C.C.E.,2000(40) RLT 1(SC)-2000(120) ELT 273, where apex court clearly laid down that after assembling on completion of process of erection, lift/ elevator becomes a part of the building or an immovable property. Also, in the case of Quality Steel Tubes(P) Ltd. vs C.C.E., U.P., it was held by the Apex Court that Erection and maintenance of the lifts forms part of the immovable property.

To summarize, AAR observed that manufacture, supply, installation and commissioning of Lifts/ Elevators is in the nature of Works Contract which results in creation of an immovable property hence ITC of GST paid on replacement of existing Lift/Elevator is not admissible.