Delhi High Court junks Rs 5,454 crore demand against Indus Towers

Allows input tax credit on inputs and input services used for setting up passive infrastructure

The Delhi High Court on Thursday allowed a plea challenging the show-cause notice (SCN) seeking to deny the input tax credit (ITC) on inputs and input services used for setting up passive infrastructure and quashed the Rs 5,454 crore demand raised against Indus Towers Ltd.

 

A Division Bench comprising Justice Yashvant Verma and Justice Dharmesh Sharma pronounced the judgment. The court had earlier granted a stay on October 21 this year, restraining the GST (Goods and Services Tax) authorities from passing the final order.

 

The petitioner, engaged in the business of providing passive infrastructure services to telecommunication service providers, challenged the common SCN issued for pan-India 48 GST registrations of the company, raising a demand of Rs 5,454 crore.

 

The SCN denied credit on inputs/services, alleging that these were used in the ‘construction’ of telecommunication towers, which was in contravention of the CGST Act (Section 17(5)(c)/(d) of the CGST Act, read with the Explanation to Section 17 of the CGST Act).

 

The petitioner informed the Bench that SCN was legally untenable, as it proceeded on the basis that telecommunication towers are immovable property and after the Supreme Court’s Bharti Airtel judgment, the SCN did not survive.

 

The Supreme Court ruled on November 20 that telecommunications companies (telcos) can avail of tax credits on duties paid for key infrastructure components like towers, parts, shelters, printers, and chairs, against the service tax they pay for providing cellular services.

 

Sandeep Sehgal, Partner-Tax, AKM Global, said the Delhi High Court's ruling to quash the Rs 5,454 crore GST demand against Indus Towers Ltd marked a major win for taxpayers, especially in the telecommunications industry.

 

"The judgment underscores that input tax credit (ITC) cannot be denied solely based on the use of inputs for 'construction' purposes. By referencing the Supreme Court's ruling in the Bharti Airtel case, the court has made it clear that telecommunication towers should not be treated as immovable property, thereby nullifying the grounds of the show-cause notice," he said.