GST ITC Admissible on Capital Goods Like Cables and Electrical Equipment Installed Outside Factory Premises: AAAR [Read Order]
AAAR ruled that manufacturers can claim ITC on capital goods such as cables and electrical equipment installed outside factory premises for power transmission.
GST - ITC - AAAR - Taxscan
GST - ITC - AAAR - Taxscan
The Gujarat Appellate Authority for Advance Ruling (AAAR) ruled that Input Tax Credit (ITC) under Goods and Services Tax Act, 2017 is admissible on capital goods such as cables and electrical equipment installed outside factory premises when used for power transmission to the manufacturer’s factory.
The case involved Elixir Industries Private Limited, a 100% Export Oriented Unit (EOU) engaged in the manufacture of hydro-entangled non-woven products at its plant in Bharuch, Gujarat.
To obtain a 1000 KVA high-tension power connection from the Gujarat Energy Transmission Corporation Limited (GETCO), the company had to install a 66 KV feeder bay and lay underground cables from the GETCO substation to its factory switchyard.
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The company undertook this work at its own cost, capitalized the expenditure in its books, and claimed ITC on the GST paid for materials and installation.
The Revenue Department appealed against the Gujarat Authority for Advance Ruling (GAAR) order, arguing that since the feeder bay and cables were located outside the factory and ownership vested with GETCO, they could not qualify as “plant and machinery.”
The department stated that ITC was blocked under Section 17(5) of the Central Goods and Services Tax (CGST) Act, 2017, and should be reversed under Section 18(6) as the capital goods were later handed over to GETCO.
The respondent’s counsel argued that the goods were used for the furtherance of business and qualified as capital goods under Section 16 of the CGST Act. They explained that the underground cables were not permanently fixed to the earth and could be removed for maintenance.
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The ITC was not blocked under Section 17(5)(c) or (d). They also cited CBIC Circular No. 219/13/2024-GST, which clarified that ducts and manholes used in optical fiber networks are part of “plant and machinery” and eligible for ITC.
The bench comprising Rajeev Topno (Member SGST) and Sunil Kumar Mall (Member CGST) observed that Elixir Industries had fulfilled all conditions for availing ITC and that the GAAR had correctly applied Section 16 of the CGST Act. The AAAR pointed out that the equipment used for transmission of electricity formed an essential part of the manufacturing setup and was not excluded from the definition of “plant and machinery.”
The AAAR upheld the GAAR ruling dated July 2, 2024, and rejected the Revenue’s appeal, stating that ITC on capital goods such as cables and electrical equipment used for power transmission outside factory premises is admissible under the CGST Act, 2017.
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