ITC admissible for capital goods and related services used to lay electricity transmission infrastructure outside the factory

The Gujarat AAR in the matter ofAlleima India Pvt Ltd [Advance Ruling No. GUJ/GAAR/R/2025/44 GST, order dated October 16, 2025] held that input tax credit (ITC) is available on capital goods and related services used for laying underground cables and transmission equipment from the DISCOM substation to the factory premises, even if installed outside the factory premises, subject to the conditions in Section 16 and exceptions in Section 17(5) of the CGST Act.

Facts:

Alleima India Pvt Ltd ("the Applicant") is engaged in manufacturing at Mehsana, Gujarat, and expanded its plant requiring increased power. For this, it laid a 2.7865 km underground cable line from the Gujarat Energy Transmission Corporation ("GETCO") substation to its factory, using its own vendor under GETCO's supervision.

GETCO required the Applicant to execute the cable-laying work, either by GETCO directly or by Applicant under supervision. The Applicant opted to do the work at its own cost, using approved vendors, and capitalised the expenses for the assets.

The Applicant contended it was eligible for ITC under Section 16 CGST Act, since the cables, wires, switchyard equipment, and related services were movable, non-immovable property and not hit by the blocked credits under Section 17(5); the ducts and manholes used in the network should also be eligible by relying on CBIC Circular No. 219/23/2024-GST dated June 26, 2024).

The Applicant approached the Authority for a ruling under the CGST Act regarding eligibility of ITC for these assets and services.

Issue:

Whether the Applicant is eligible to avail ITC on procurement of capital goods, cables, wires, electrical equipment, supervision charges, and installation services used for transmission of electricity from the DISCOM substation to the factory premises, even when such goods are installed outside the factory under the GETCO policy, in light of Sections 16 and 17(5) of the CGST Act?

Held:

The Gujarat AAR in Advance Ruling No. GUJ/GAAR/R/2025/44 GST held as under:

· Observed that, the goods in question i.e., cables, wires, switchyards, aluminium corrugated sheath are movable and can be dismantled, coiled, and relocated, and do not constitute immovable property within the blocked credit category under Section 17(5)(c) and 17(5)(d).

· Noted that, the applicant had capitalised all expenses for the project as assets, fulfilled all Section 16 conditions, and submitted necessary invoices, with depreciation claimed on asset value except GST portion.

· Held that, CBIC Circular No. 219/23/2024-GST dated June 26, 2024 clarifies that ducts, manholes, and such infrastructure for transmission installable qualify as 'plant and machinery,' and ITC on these is not restricted by Section 17(5).

· Noted that. even if the GETCO agreement did not explicitly vest ownership with GETCO, applicant's capitalization and depreciation on the assets sufficed for ITC eligibility, and if assets revert to GETCO, ITC reversal under Section 18(6) is mandated.

· Held that, there is no restriction under Section 17(5) on ITC for such movable transmission infrastructure laid outside the factory premises, if conditions in Section 16 are met.

Our Comments:

The AAR's reasoning relies on interpreting "plant and machinery" and movability, in line with CBIC Circular No. 219/23/2024-GST dated June 26, 2024, which clarified that ducts and manholes for transmission installables are infrastructure covered under 'plant and machinery' for ITC, unless specifically excluded. The decision aligns with the Hon'ble Gujarat Appellate Authority for Advance Ruling In the matter of Elixir Industries Private Limited [Advance Ruling Appeal No. GUJ/GAAAR/APPEAL/2025/16, order dated September 22, 2025] held that Input Tax Credit (ITC) is admissible on capital goods such as wires, cables, and electrical equipment used for power transmission from the grid to the factory, even if installed outside factory premises and subsequently transferred to Gujarat Energy Transmission Corporation Ltd. (GETCO) for maintenance, provided the conditions under Section 16 of the CGST Act, 2017 are met.

Relevant Provisions:

Section 16 of the CGST Act, 2017:

"16. Eligibility and conditions for taking input tax credi.-

(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 or both 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.

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;

(b) he has received the goods or services or both.

Explanation.- For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services-

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person;

(ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted;

(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be paid by him along with interest payable under section 50, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon. .."

Section 17(5)(c) & (d), CGST Act, 2017:

17. Apportionment of credit and blocked credits.-

"(5) Notwithstanding anything contained in 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:-

(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input 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 and machinery on his own account including when such goods or services or both are used in the course or furtherance of business.

Explanation 1.-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;

Explanation 2.--For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal, or other authority, any reference to "plant or machinery" shall be construed and shall always be deemed to have been construed as a reference to "plant and machinery."

CBIC Circular No. 219/13/2024-GST dated June 26, 2024:

"Whether the input tax credit on the ducts and manholes used in network of optical fiber cables (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 ?

1. Sub-section (5) to Section 17 of the CGST Act provides that input tax credit shall not be available, inter alia, in respect of the following:

i. works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; or

ii. 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.

2. Explanation in section 17 of CGST Act provides that 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 land, building or any other civil structures; telecommunication towers; and pipelines laid outside the factory premises.

3. Ducts and manholes are basic components for the optical fiber cable (OFC) network used in providing telecommunication services. The OFC network is generally laid with the use of PVC ducts/sheaths in which OFCs are housed and service/connectivity manholes, which serve as nodes of the network, and are necessary for not only laying of optical fiber cable but also their upkeep and maintenance. 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 from the 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.

4. Accordingly, it is clarified that availment of input tax credit is not restricted in respect of such ducts and manhole used in network of optical fiber cables (OFCs), either under clause (c) or under clause (d) of sub-section (5) of section 17 of CGST Act."