Summary of ITC on Ducts and Manholes for Optical Fiber Cables Network
Clarification has been issued on ITC on Ducts and Manholes for Optical Fiber Cables Network as some of the GST authorities denying ITC on Ducts and Manholes used in Optical Fiber Network based on the arguments that these items are classified as Immovable Property which covers under section 17(5) of CGST Act,2017.Hence to avoid unnecessary litigation and disputes in telecom sector COAI has issued clarification which are as under:
Issue: Whether the input tax credit on the ducts and manholes used in network of optical fibercables (OFCs) for providing telecommunication services is barred in terms of clauses (c) and (d) of sub-section (5) of section 17 of the CGST Act, read with Explanation to section 17 of CGST Act ?
Clarification:
Section 17(5) of CGST Act,2017 blocks the avaibility of ITC in the case :
Work contract service: If these Service are used to construct Immovable property. ITC can not be claimed.However, an exception applies if the work contract service is used as input for further supply of similar work contract service.
Goods and service used for own construction: If business buys goods or services to build Immovable property for its own use , ITC is not allowed.The only exception is if the items are classified as Plant or Machinery in which case ITC is allowed.
Explanation to section 17 provides Plant and Machinery means the equipment, machines or tools are permanently fixed to the ground and are used to produce goods or provide services.However, it excludes Land,building or other civil structures, Telecommunication Towers, Pipelines laid outside the factory.
Ducts and Manholes are essential parts of Optical Fiber cable network used to provide telecommunication services. In view of the Explanation in section 17 of the CGST Act, it appears that ducts and manholes are covered under the definition of “plant and machinery” as they are used as part of the OFC network for making outward supply of transmission of telecommunication signals from one point to another.
Moreover, ducts and manholes used in network of optical fiber cables (OFCs) have not been specifically excluded fromthe definition of “plant and machinery” in the Explanation to section 17 of CGST Act, as they are neither in nature of land, building or civil structures nor are in nature of telecommunication towers or pipelines laid outside the factory premises.
Businesses providing telecommunication services can claim ITC on the GST paid for Ducts and Manholes used in their Optical Fiber Cables Network.
