Summary of Circular No 219/13/2024-GST

Summary of Clarification on ITC for Ducts and Manholes in OFC Networks

Subject: Clarification on availability of input tax credit (ITC) for ducts and manholes used in the network of optical fiber cables (OFCs) under section 17(5) of the CGST Act, 2017.

Background:

  • The Cellular Operators Association of India (COAI) has raised concerns regarding the denial of ITC on ducts and manholes used in OFC networks. The tax authorities have blocked ITC on the grounds that these items are immovable property, as per section 17(5) of the CGST Act.

Clarification Issued:

  1. Legal Provision:
    • Section 17(5) of the CGST Act disallows ITC for:
      • Works contract services for the construction of immovable property (excluding plant and machinery).
      • Goods or services received for constructing immovable property (excluding plant and machinery) on the taxpayer’s own account.
  2. Definition of Plant and Machinery:
    • As per the explanation in section 17 of the CGST Act, “plant and machinery” includes apparatus, equipment, and machinery fixed to earth used for making outward supply and includes their foundations and supports. However, it excludes land, buildings, civil structures, telecommunication towers, and pipelines outside factory premises.
  3. Ducts and Manholes:
    • Ducts and manholes are essential components of the OFC network, used for housing and maintaining the optical fiber cables. They are integral to providing telecommunication services.
    • These components qualify as “plant and machinery” since they are used for making outward supplies of telecommunication signals and are not classified under the excluded items in the definition.
  4. Conclusion:
    • ITC on ducts and manholes used in OFC networks is not restricted under clauses (c) or (d) of section 17(5) of the CGST Act.
    • These items are deemed part of “plant and machinery” and thus eligible for ITC.

Action Required:

  • Field formations should issue trade notices to publicize this clarification.
  • Any implementation difficulties should be reported to the Board.

This clarification aims to prevent litigation and ensure uniform application of GST provisions across the telecommunication sector.