GST ITC allowed on goods & services used for movable infrastructure : AAR

infrastructure provided by the applicant is different from “Telecommunication Tower” in as much as

AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND

Vindhya Telelinks Ltd., In re

RULING NO. 06/2018-19 AND APPLICATION NO. 01/2018-19

AUGUST  28, 2018

(b) Monopole Tower – A monopole tower is a single steel or concrete tube tower. It requires one foundation and typically don’t exceed 50 metres. The antennas are mounted on the exterior of the tower.

(c) Guyed Tower/Mast – Guyed lowers used to be the cheapest tower to construct, but require the greatest amount of kind. For taller heights ( 100 metres and greater) it is much cheaper to build a guyed tower. Most radio end television towers are guyed towers. A guyed tower is a straight tower (alsoreferred to as mast) connected by guy wires attached to the ground in .ill directions, which anchor and support the tower.

6.5 As per applicant, they are engaged in leasing of Telecommunication Fibre’. In hilly areas, the telecommunication fibres are kept to be elevated unlike in plain areas where the fibres are put underground. It is only because of this reason the fibres cannot be put underground in the hilly areas;, they are placed on the poles. The infrastructure so erected by them to elevate: the fibre so that “Telecommunication Operators” can connect the fibre to their “Telecommunication Towers”. The picture of the said infrastructure is as under:

6.6 The process of creation of aerial network done by the applied under:

6.7 The details of items used in the infrastructure are as under:

6.8 To appreciate the law position in this regard, first we have to go through the provisions of Input TaxCredit of CGST/SGST Act, 2017 and the relevant portion of the same are reproduce below:

16(1). Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49 be entitled to take credit of input tax charged on any supply of goods or services orboth to him which are used or intended to be used in the course or furtherance- of his business and the said amount shall be credited to the electronic credit ledger of such person.

17(5) Notwithstanding anything contained m sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:—

(a) motor vehicles and other conveyances except when they are used —

(i) for making the following taxable supplies, namely:—

(ii) for transportation of goods;

(h) the following supply of goods or services or both —

(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an in/ml service for further supply of works contract service;

(d) 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.

Explanation.—For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

(e) goods or services or both on which tax has been paid under section 10;

(J) goods or services or both received by a non-resident taxable person except on goods imported by him;

(g) goods or services or both used for personal consumption;

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.

17(6) The Government may prescribe the manner in which the credit referred to in subsections (1) and (2) may be attributed.

Explanation.— For the purposes of this Chapter and Chapter VI, 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—

6.9 The explanation (supra) put restrictions on availment of cenvat credit in respect of apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods in services or both in respect of (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premise.

6.10 The applicant in their submission has claimed that the infrastructure (supra) provided by them is different from “Telecommunication Tower”. Thus we are not deciding any wider question but restricting our conclusion to the facts and circumstances which was filed for our consideration in I lie application. So we have to know about the charactistics and use of “Telecommunication Tower” . The details of the same are as under:

6.11 On analyzing the work being undertaken by the applicant as discussed above, we observe that:

6.12 Telecommunication Tower is not defined in CGST/SGST Act, 2017. So to know what is “Telecommunication Tower”, we have gone through the Hon’bie Gujarat High Court judgment dated 24/25.04.2013 in the case of GTL. Infrastructure Ltdv. State of Gujarat (Through Secretary). The relevant portion of the same is reproduce below:

5. The petitioner is a company registered under the Companies Act. The petitioner is engaged in providing infrastructure for Mobile Telecommunication Services. The petitioner enjoys necessary license and registration issued by the competent authority under the Indian Telegraph Act, 1885. For providing such infrastructure to its customers, the petitioner company is required to install Base Transceiver Station ( BTS for short), more commonly known as mobile towers. For setting up such mobile towers, the petitioner enters into agreements with private owners. Armed with such agreements, the petitioner would apply to the local authorities for permission to erect such a structure. As pointed out by the petitioner in the petition, such structure consists of the following :

6. To understand the purpose of such BTS , we may refer to the booklet circulated by the Department of Telecommunications Ministry of Communications & IT, Government of India and titled as Mobile Communication Radio Waves & Safety, in which it is stated as under :

Cellular Phone tower & waves Mobile phone base stations are radio transmitter with antennas mounted on either transmission towers or roof tops on buildings. The antennas need to be located at optimum locations and heights so they can adequately cover the area. Antenna position usually range in height from 50-200 feet. When a person makes a cellphone call, a signal is sent from the mobile phone antenna to the nearest base station antenna. The base station responds to this signal hy assigning it an available radio frequency channel. RF waves transfer tin-information to the base station. The voice data signals are then sent to a switching center, which transfers the call to its destination. The voice signals are then relayed back and forth during the call. In India mobile phones operate in the frequency range of:

869-890 MHz(CDMA) 935-960 MHz(GSM900) 1805-1880 MHz(GSM18()0) 2110-2170 Mhz(3G) Cell phones connect with the base station as frequently as every minute so as to relay information about your location which generates a near-field by the cell phone even when you are not making a call. When you make a call on a mobile phone, the phone transmits radio waves to the antenna of a nearby base station. The base station then transmits the call using the mobile telecommunications network to the phone of the person you are calling.

In town and cities where there are many phone users, more base stations are needed than in rural areas. The antenna of the base stations are mounted on mast, buildings or towers. The intensity of the radio waves emitted from base stations in places where the public have access are generally found to be hundreds of times below the health and safety guidelines.

The intensity of electro-magnetic wave (power density) weakens very quickly as it moves away from the antenna. It is reduced to 1/4 when the-distance from the antenna double and to 1/9 when the distance is three times.

6.13 The hon’ble Supreme Court of India in civil appeal nos.5360-5363 of 2013 in the case of Ahmadabad Municipal Corporation v. GTL Infrastructure Ltd. & ors. also confirm the fact of hon’ble Gujarat High Court (supra). The relevant portion of the same is reproduce below:

22. We may now see what a Mobile Tower is and consists of. In technical terms a Mobile Tower is called a “Base Transceiver Station.” It involves the making of structure consisting of the following:

6.14 In light of above we observe that the telecommunication towers are used for hoisting the antennae to predetermined and technically viable heights for optimum coverage of the cellular network. The towers are typically erected at the site and also comprise poles for mounting the antennae, shelters and housing for electrical and telecom equipment. Telecommunication Towers are in the nature of immovable property and are consists of

6.15 We observed that each of these goods had independent functions and hence, they cannot be treated and classified as single unit. It also observed that all goods are not eligible for credit and only those relatable to the output services would be eligible for credit. Since the towers merely enabled the antennae to function, they did not enter the composition of the antennae themselves and could not be construed as components or parts thereof. We further observed that only telecom equipments like BTS transmitters which ; in-used in providing telecom services alone would be liable to input credit. The lowers and PFB are in the nature of immovable goods hence ITC not admissible on the same.

6.16 We find that “immovable property” has not been defined in CGST/SGST Act. 2017. So we have to gn through the Section 3 of General Clauses Act,. 1897, the relevant portion of the same is reproduce below:

(26) “immovable property” shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth;

(36) “movable property” shall mean property of every description, except immovable property;

6.17 We also find that the hon’ble High Court of Bombay in Central Excise Appeal no. 73 & 119 of 2012 in the case of Bharti Airtel decided the case on 26.08.2014 wherein it was held as under:

32. ……………… tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods.

6.18 The goods has been defined under section 2(52) of CGST/SGST Act, 2017 which is read as under:

“goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply”

6.19 As discussed supra we observe that if the goods are movable from one place to another in the same position or liable to he dismantled and re-erectedat the later place, if it is liable to be shifted and was dismantled or re-created a later place, it will be movable property. But if erected permanently with out being shifted from place to place, then it would be treated as permanently attached to the earth and the same will be treated as immovable property.

6.20 Thus we observe that “telecommunication tower” does not come within the purview of goods in as much as the same being a immovable property and the ITC on “telecommunication tower” is not admissible as per explanation to Section 17(6) of the CGST/SGST Act, 2017.

6.21 In view of the above discussion we observe that the infrastructure provided by the applicant is different from “Telecommunication Tower” in as much as

6.21 Thus, we hold that the infrastructure provided by the applicant is different from “Telecommunication Tower” and accordingly applicant can avail ITC on GST paid on the goods (supra) & services in terms of section 16(1} of CGST/SGST Act, 2017, consumed while providing the supply in question.