Input tax credit restrictions bar credit for cross-country pipelines outside factory premises, including their maintenance services.

Under section 17(5) of the CGST Act, input tax credit is barred on goods and services used to construct a cross-country pipeline laid outside the factory premises because such a pipeline is treated as immovable property and is excluded from the definition of plant and machinery. The same credit restriction also applies to operation and maintenance services for that pipeline, as they relate to the same excluded asset and do not create a separate entitlement to credit.

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Issues: (i) Whether input tax credit was admissible on goods and services used for laying the cross-country pipeline outside the factory premises; (ii) Whether input tax credit was admissible on operation and maintenance services for the said pipeline.

Issue (i): Whether input tax credit was admissible on goods and services used for laying the cross-country pipeline outside the factory premises.

Analysis: The statutory scheme under section 17(5) of the Central Goods and Services Tax Act, 2017 excludes credit for works contract and construction-related inputs used for immovable property other than plant and machinery. The explanation to that provision specifically excludes pipelines laid outside the factory premises from the definition of plant and machinery. The pipeline was found to be permanently embedded and intended for long-term use outside the factory premises, and therefore to be an immovable property rather than plant and machinery used for outward supply.

Conclusion: Input tax credit on goods and services used for laying the cross-country pipeline outside the factory premises was not admissible.

Issue (ii): Whether input tax credit was admissible on operation and maintenance services for the said pipeline.

Analysis: Once the pipeline was held to be outside the scope of plant and machinery and to be an immovable property, the restrictions in section 17(5) applied equally to services consumed for its maintenance. The operation and maintenance services were connected with the same excluded asset and did not confer a separate entitlement to credit.

Conclusion: Input tax credit on operation and maintenance services for the pipeline was not admissible.

Final Conclusion: The ruling denied input tax credit on both the construction-related inputs and the operation and maintenance services, as the pipeline was treated as an immovable property and not as plant and machinery under the GST credit restrictions.

Ratio Decidendi: Input tax credit is barred under section 17(5) where the goods or services are used for constructing or maintaining an immovable property that falls outside the statutory definition of plant and machinery, including pipelines laid outside the factory premises.

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