Clarification on availability of input tax credit on ducts and manholes used in network of optical fiber cables (OFCs) in terms of section 17(5) of the WBGST Act, 2017 - GST - States - TRADE CIRCULAR No. 13/2024

GOVERNMENT OF WEST BENGAL DIRECTORATE OF COMMERCIAL TAXES 14, BELIAGHATA ROAD, KOLKATA-700015 TRADE CIRCULAR No. 13/2024 (Corresponding Central Circular No. 219/13/2024-GST) DATED: 08.07.2024 Subject: Clarification on availability of input tax credit on ducts and manholes used in network of optical fiber cables (OFCs) in terms of section 17(5) of the WBGST Act, 2017. Representations have been received from Cellular Operators Association of India (COAI) submitting that input tax credit (ITC) is being denied by some tax authorities on ducts and manholes used in network of optical fiber cables (OFCs) on the ground that the same is blocked as per section 17(5) of the West Bengal Goods Services Tax Act, 2017 (herein after referred to as the WBGST Act ), being in nature of immovable property (other than Plant and Machinery). It has been requested to issue clarification in respect of availability of ITC on ducts and manholes used in network of optical fiber cables (OFCs), so as to prevent unwarranted litigation in the telecommunication sector across the country. 2. In order to ensure uniformity in the implementation of the provisions of law across the field formations, the Commissioner, in exercise of his powers conferred by section 168 of the WBGST Act, hereby clarifies the issue as below. Issue Clarification Whether the input tax credit on the ducts and manholes used in network of optical fiber cables (OFCs) for providing telecomm-unication services is barred in terms of clauses (c) and (d) of sub-section (5) of section 17 of the WBGST Act, read with Explanation to section 17 of WBGST Act ? 1. Sub-section (5) to Section 17 of the WBGST 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 the WBGST 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 WBGST 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 WBGST 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 WBGST Act. 3. Difficulty, if any, in the implementation of this Trade Circular may be brought to the notice of the Commissioner. Sd/- (DEVI PRASAD KARANAM, IAS) Commissioner, State Tax West Bengal