2024 (7) TMI 982 - AAR - GST

Company eligible for ITC on transmission cables and electrical equipment under section 16 despite transfer to GETCO

In Re: M/s Elixir Industries Private Limited,

The AAR Gujarat held that the applicant was eligible to claim ITC on capital goods including wires, cables, and electrical equipment used for electricity ... Eligibility to take ITC on the capital goods in the form of wires/cables electrical equipment etc used for transmission of electricity from power station of the DISCOM to the factory premises of the registered person which are installed outside factory premises as per rules and policy of GETCO, Government of Gujarat Electricity distribution company - HELD THAT:- It is the applicant's case that the conditions specified under section 16 stands fulfilled. The applicant's averment to this extent appears to be correct. The applicant's averment is that they are not hit by 17 (5) (c), ibid. The applicant further stales that they have capitalized the basic value as capital goods and the tax portion is being availed as ITC. Therefore, it is not hit even by the explanation. As far as 17 (5) (d) is concerned, the applicant states that they are covered by the explanation which defines plant and machinery and that they are also not hit by the three exclusions listed in the explanation, The ITC that the applicant wishes to avail is on capital goods viz cables/wires, equipment viz 750 meters new 66 KV S/Cable (3+1), 630 mm square aluminium corrugated sheath/G cable line for installation of 66 KV feeder bay at sub-station of GETCO. On a specific query raised during the course of personal hearing, it was stated by the representative of the applicant that though these are underground cables, they are not fixed to earth; that they are kept in a duct and can be removed/opened as and when any maintenance is required to be done on these goods - the ITC sought by the applicant is not blocked by sub-sections 17 (5)(c) & (d), ibid. What is left to be examined now is whether the transfer of the service line to GETCO under an agreement, on a stamp paper of Rs. 300/- at zero value [as claimed by the applicant), which even in terms of the agreement with GETCO [as reproduced supra], would remain the property of GETCO, would have any bearing on the availment of ITC - there is no provision under the CGST Act, 2017 which bars availment of ITC by the applicant if subsequently the capitalized goods are handed over to GETCO/others. However, we would like to point out to the applicant of the liability cast on him, in such situations in terms of section 18 (6) of the CGST Act, 2017. The applicant is eligible to take ITC on the capital goods in the form of wires/cables electrical equipment etc [viz 750 meters new 66 KV S/Cable (3+1), 630 mm square aluminium corrugated sheath/G cable line for installation of 66 KV feeder bay at sub-station of GETCO] used for transmission of electricity from power station of the DISCOM to the factory premises of the applicant. Issues Involved:1. Eligibility of Input Tax Credit (ITC) on capital goods used for transmission of electricity from the power station to the factory premises.2. Compliance with Section 16 and Section 17 of the CGST Act, 2017.3. Impact of transferring capitalized goods to GETCO on ITC eligibility.Detailed Analysis:1. Eligibility of Input Tax Credit (ITC) on Capital Goods:The applicant, engaged in the manufacture of various products under Chapter 56 of the Customs Tariff Act, 1975, sought a ruling on whether a manufacturer is eligible to take ITC on capital goods such as wires/cables and electrical equipment used for transmitting electricity from the power station to the factory premises, even if these are installed outside the factory premises as per the rules and policy of GETCO.2. Compliance with Section 16 and Section 17 of the CGST Act, 2017:The applicant claimed compliance with Section 16 of the CGST Act, 2017, which outlines the eligibility and conditions for taking ITC. The applicant asserted that they had satisfied all conditions, including possession of a tax invoice, receipt of goods and services, payment of tax to the government, and furnishing of returns. The authority confirmed that the applicant's claim appeared correct.Section 17 of the CGST Act, 2017, which deals with the apportionment of credit and blocked credits, was also considered. The applicant argued that ITC is not blocked under Section 17(5)(c) and (d), as the goods are capitalized only on the basic value and installation charges, and the tax portion is availed as ITC. The authority noted that the goods in question (cables/wires, equipment, etc.) are not fixed to earth but kept in a duct and can be removed for maintenance, thus not falling under the exclusions listed in the explanation to Section 17.3. Impact of Transferring Capitalized Goods to GETCO on ITC Eligibility:The applicant informed that the goods would be transferred to GETCO through an agreement on a stamp paper at zero value, and these would remain the property of GETCO. The authority found no provision under the CGST Act, 2017, barring the availment of ITC if the capitalized goods are subsequently handed over to GETCO. However, the applicant was reminded of the liability under Section 18(6) of the CGST Act, 2017, which was not delved into as it was not the issue at hand.Ruling:The applicant is eligible to take ITC on the capital goods in the form of wires/cables and electrical equipment (specifically, 750 meters of new 66 KV S/Cable, 630 mm square aluminum corrugated sheath U/G cable line for the installation of a 66 KV feeder bay at the sub-station of GETCO) used for the transmission of electricity from the power station of the DISCOM to the factory premises of the applicant.