ITC not available on Goods and Services used for Construction of Pipeline outside the Factory site u/s 17 of GST Act: AAR [Read Order]

The Maharashtra Authority of Advance Ruling (AAR) presided over by members Rammohan Rao and T.R.Ramnani has held that Input Tax Credit (ITC) is not available on goods and services used for the construction of a pipeline laid outside the factory premises under the Section 17 of Goods and Services (GST) Act.

The applicant M/s. Mumbai Aviation Fuel Farm Facility Private Limited (MAFFFL),  is in the business of providing fuel infrastructure services wherein the ATF of oil PSUs is stored in storage tanks, filed an application under the AAR seeking an advance ruling on the availability of ITC on inputs used for the construction of pipelines outside the premises of the factory.

The fact is that the total length of the connector line to be constructed is approximately 4 Km. However, out of the total length of the connector pipeline, 10% of the pipeline falls in the area licensed to MAFFFL and the rest of pipeline length falls in the area which is outside the project site.

The applicant with their submission prayed for ITC on the GST paid on construction of the connector pipeline should be allowed on considering the fact that the Connector Pipeline is an integral part of the Fuel Hydrant system without which the sale at the wing tip of the aircraft cannot be completed.

Further, though the spread of the pipeline (which is part of plant and machinery) is outside the MAFFFL's premises (MAFFFL's premises is not a factory), it is in a loop of hydrant system which both originates and terminates in MAFFFL's premises.

As per the bench ‘Plant and Machinery’ explained under  section 17 does not include a pipeline laid outside the factory premises.

The fact that 90% of the pipeline is beyond the limits of the licensed area has also been observed by the bench, and it cannot be stated that this is the sole pipeline outside that is considered to be a component of the plant and machinery.

The AAR members remarked that the applicant has failed to establish how it is entitled to ITC in the presence of the express legal bar to claiming such ITC.

The bench held that ITC is not available where inputs are consumed in the construction of immovable property outside licensed premises of MFFFLs under the GST Act.

To Read the full text of the Order CLICK HERE

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