Availability of Input Tax Credit on Ducts and Manholes used in Optical Fiber Cable (OFC) Networks under GST

The Circular No. 219/13/2024-GST issued by CBIC (Central Board of Indirect Taxes and Customs) on June 26, 2024, addresses concerns regarding the availability of input tax credit (ITC) on ducts and manholes used in the network of optical fiber cables (“OFCs”).?

Clarifications from the Circular are as under:?

1. Essential Components for Telecommunication Services: Ducts and manholes are crucial for the laying, maintenance, and connectivity of optical fiber cables (OFCs), which are essential for providing telecommunication services.?

2. Definition of "Plant and Machinery": According to the Explanation in section 17 of the CGST Act, "plant and machinery" includes equipment and apparatus fixed to the earth by foundation or structural support, used for making outward supplies of goods or services. This definition explicitly excludes items such as land, buildings, civil structures, telecommunication towers, and pipelines outside factory premises.?

3. Integral Parts of "Plant and Machinery":? Ducts and manholes deployed within the OFC network are integral to the definition of "plant and machinery" because they facilitate the transmission of telecommunication signals from one point to another. Furthermore, these components have not been specifically excluded from the definition of “plant and machinery” as per the Explanation to section 17 of the 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. Rather, they serve as essential elements of the "plant and machinery" utilized in transmitting telecommunication signals from one location to another.?

4. ITC Availability: Based on these clarifications, input tax credit on ducts and manholes used in the OFC network is not restricted under section 17(5) of the CGST Act. This means businesses can claim ITC on such components used in their OFC networks.?

Comments :

The above Circular aims to provide uniformity in the interpretation and application of GST provisions across different tax authorities and seeks to prevent unnecessary litigation in the telecommunications sector related to ITC eligibility.?

Overall, this clarification ensures that businesses involved in the telecommunications sector can continue to claim input tax credit on essential components like ducts and manholes, supporting the expansion and maintenance of OFC networks in India.?

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