Lift is not Plant and Machinary and therefore GST Input is not permissible: Says AAR

AAR held that lift is integral part of the building and thus falls under the exclusion from plant and machinery and therefore ITC is not allowed on the same.

Authority also discussed the definition of Plant and Machinary and observed that only such foundation or civil structure shall be included in the definition of Plant and Machinary which is used to fixed and fasten the plant and machinery.

Facts of case and Arguments by Applicant

Applicant is constructing a multi storied hotel and will have approx. 100 rooms.

As the hotel is multi storied, hence to provide facility to guest, lift is required in the hotel premises.

Section 16 Chapter V of CGST Act 2017 lay down the conditions specified for claiming Input Tax Credit. Lift that will be purchased will full fills all the conditions of section 16.

Section 17 Lay downs certain conditions for Apportionments of credit and block credits.

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)

As Lift is a machinery and hence in our opinion does not fall in the restriction of section 17(5) of CGST Act 2017.

Lift is an essential part in a hotel and without which it very difficult to provide best services to our guest.

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)

As Lift/escalator is a machine and it falls under HSN 8428 and hence excluded form block credit as specified in section 17(5).

Definition of Plant and Machinary

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 or any other civil structures;

ii. telecommunication towers; and

iii. pipelines laid outside the factory premises

Held by AAR

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 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 an 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.

The explanation below Section 17(6), relating to the expression “plant and machinery” has included foundation and structural support in the term “plant and machinery”. It has also been stated that such foundation and structural support are used for fixing apparatus, equipment and machinery. Therefore, in the definition foundation and structures are duly included. Further the definition has excluded and building and any other civil structure from the definition of the “plant and machinery”. Prima facie, there seems to be contradiction in the inclusion of “such foundation and structural supports” and exclusion of or any other civil structures”. This apparent contradiction is however negated by the fact that the exclusion of the building or civil structure is for plant and machinery per se, while the inclusion is for foundation and structure is only to the extent that such foundation and structure is used to fasten the apparent, equipment or machinery to earth. Thus, if the plant and / or machinery is fixed / fastened to the earth by a foundation or civil structure then such foundation or civil structure shall be included in plant and machinery.

Accordingly, in the explanation relating to Plant and Machinery, beneath sub-section (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 structures 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.

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