Input tax credit blocked for tie-in pipeline construction where the pipeline is treated as outside factory premises under GST exclusions.

Input tax credit on GST paid for construction of the tie-in pipeline used to carry re-gasified LNG from the FSRU to the National Grid is not admissible under section 17(5)(c) and section 17(5)(d) of the CGST Act. The Authority treated the FSRU as factory premises because regasification activity occurs there, but held that the proposed pipeline is a pipeline laid outside the factory premises and therefore falls within the statutory exclusion. It further held that attached equipment and control systems do not alter the pipeline's essential character for GST purposes, and that the cited case law cannot override the specific statutory definition under the Act.

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Issues: Whether input tax credit of GST paid on goods and services used for construction of the tie-in pipeline for supply of re-gasified LNG from the FSRU to the National Grid is admissible, or is blocked under section 17(5)(c) and section 17(5)(d) of the CGST Act.

Analysis: The applicant sought credit on the footing that the tie-in pipeline was an integral part of the regasification facility and, therefore, fell within the concept of plant and machinery. The Authority examined the amended language of section 17(5), the exclusion for pipelines laid outside factory premises, and the effect of the retrospective amendment made by the Finance Act, 2025 to clause (d). It held that the FSRU functioned as a factory premises because regasification activity was carried out there, and that the proposed pipeline connecting the FSRU to the National Grid was a pipeline laid outside the factory premises. The Authority further held that the additional equipment and control systems attached to the pipeline did not change its essential character for GST purposes, and the cited case law did not displace the specific statutory definition under the CGST Act.

Conclusion: The tie-in pipeline does not qualify so as to escape the exclusion, and input tax credit on its construction is not admissible under section 17(5)(c) and section 17(5)(d) of the CGST Act.

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