AAR: ITC Admissible on Electricity Transmission Infrastructure Outside Factory
Issue: Whether a manufacturer is eligible to claim Input Tax Credit (ITC) on capital goods and related installation services used for laying underground cables and transmission infrastructure (like cables, wires, switchyards, ducts, and manholes) from the DISCOM substation to the factory premises, especially when the infrastructure is installed outside the factory premises under the DISCOM’s policy.
Facts:
The Applicant, Alleima India Pvt Ltd (a manufacturer in Mehsana, Gujarat), undertook the work of laying a 2.7865 km underground cable line and installing transmission equipment from the Gujarat Energy Transmission Corporation (GETCO) substation to its factory.
The Applicant executed the work using its own vendors at its own cost, subject to GETCO’s supervision.
The Applicant capitalized the expenses as assets and claimed depreciation on the asset value, excluding the GST portion.
The tax authorities often dispute ITC claims on such assets, classifying them as immovable property under the blocked credit provisions of Section 17(5).
Decision:
The Gujarat Authority for Advance Ruling (AAR) held that the Applicant is eligible to avail ITC on the capital goods (cables, wires, electrical equipment) and related services used for the electricity transmission infrastructure, even if installed outside the factory premises.
Key TakeDowns:
Movability and ‘Plant and Machinery’: The AAR ruled that the items (cables, wires, switchyards, etc.) are movable because they can be dismantled, coiled, and relocated. Thus, they do not constitute immovable property and are not hit by the blocked credit clauses under Section 17(5)(c) and 17(5)(d).
CBIC Circular on Infrastructure: The AAR relied on CBIC Circular No. 219/23/2024-GST, which clarifies that ducts, manholes, and similar infrastructure for transmission installables qualify as ‘plant and machinery,’ and ITC on these is therefore not restricted by Section 17(5).
Ownership and Reversal: The Applicant’s act of capitalizing and claiming depreciation on the assets was sufficient for ITC eligibility. However, the AAR noted that if the assets were ever to revert to GETCO, the Applicant would be mandated to reverse the ITC under Section 18(6). * Judicial Alignment: The decision aligns with previous rulings by the Gujarat AAAR, reinforcing that ITC is admissible on power transmission infrastructure used in the furtherance of business, provided the conditions under Section 16 are met.
Judgement:- Alleima-India-Pvt-Ltd