Introduction
Input tax credit (ITC on telecom towers under GST) has remained one of the most consistently disputed—and consistently denied—claims since the introduction of the GST regime. Despite telecom infrastructure being indispensable for the supply of taxable telecommunication services, GST law continues to treat telecom towers as ineligible assets for ITC, primarily due to their classification as immovable civil structures. Taxpayers have repeatedly argued that telecom towers are essential business assets and should qualify either as plant and machinery or as infrastructure used for making outward taxable supplies. However, such claims have consistently failed in the face of the statutory exclusion of telecom towers under Section 17 of the CGST Act.
The controversy surrounding GST ITC on telecom infrastructure is not new. Under the pre-GST service tax regime, courts frequently applied the functional test to telecom towers, resulting in divergent judicial outcomes across jurisdictions. Some rulings allowed credit based on business indispensability, while others denied it due to the immovable nature of towers. GST, however, marks a clear legislative departure from this approach. The statute now draws a firm boundary between eligible capital goods and telecom towers treated as immovable property under GST, regardless of commercial necessity.
This article examines why ITC on telecom towers remains blocked under GST, how Section 17 overrides earlier judicial views, and why functional arguments on telecom towers have limited relevance post-GST.
Statutory Classification of Telecom Towers under GST
The starting point for analysing ITC eligibility on telecom towers is Section 17(5) of the CGST Act, read with the Explanation defining “plant and machinery.” While the Explanation adopts an inclusive definition, it simultaneously carves out clear exclusions for land, buildings, civil structures, and foundations or structural supports used for fixing plant and machinery. Telecom towers, by their very nature, fall squarely within these excluded categories.
From a statutory perspective, telecom towers are treated as immovable civil structures rather than as plant or machinery. They are permanently embedded, constructed through civil works, and designed to provide structural support to transmission equipment rather than to perform a mechanical or operational function themselves. As per our experience, this classification has been the principal basis on which tax authorities have consistently denied ITC claims on towers under GST.
Importantly, the GST framework does not permit re-characterisation of telecom towers based on their role in business operations. Even though active telecom equipment installed on towers may qualify independently, the tower itself remains excluded by legislative design. This statutory classification leaves little scope for interpretative flexibility once Section 17(5) is applied.
Pre-GST Judicial Position on Telecom Towers
Before the introduction of GST, the eligibility of credit on telecom towers was examined largely through judicially evolved principles under the service tax regime. Courts were frequently called upon to determine whether telecom towers qualified as “capital goods” or “inputs” based on their functional role in providing taxable services. The dominant approach during this period was the functional test, which focused on whether the asset was essential or indispensable for the provision of output services.
Several rulings recognised that telecom towers, though immovable in nature, were critical for signal transmission and network connectivity. On this basis, certain courts allowed CENVAT credit by treating towers as integral to the service delivery mechanism. However, this judicial approach was far from uniform. Other decisions emphasised the immovable and civil nature of towers and denied credit, leading to inconsistent outcomes across jurisdictions.
As per our experience, this divergence stemmed from the absence of a clear statutory exclusion under the pre-GST regime. Judicial reasoning filled the legislative gap, often prioritising functional necessity over physical characteristics. It is this pre-GST background that taxpayers continue to invoke under GST, despite the fundamental change in legislative structure.
GST Regime Shift: Statutory Override of Earlier Judicial Views
GST marks a decisive departure from the interpretative flexibility that characterised the pre-GST credit regime. Unlike service tax, the CGST Act explicitly defines the scope of ineligible credits through Section 17(5), leaving little room for judicial expansion. The Explanation to Section 17 deliberately excludes civil structures and foundations, thereby foreclosing arguments that rely solely on functional indispensability.
This statutory clarity reflects a conscious legislative choice to override earlier judicial approaches that had allowed credit on telecom towers based on business necessity. As per our experience, courts and adjudicating authorities under GST have increasingly recognised this shift and have been reluctant to rely on pre-GST precedents without first reconciling them with the express language of Section 17.
The principle that judicial interpretation cannot override clear statutory exclusion has gained renewed emphasis in GST disputes. Where the legislature has drawn a bright line, courts have generally declined to reintroduce functional tests through interpretation. Consequently, earlier service tax rulings on telecom towers have limited persuasive value under GST and cannot be treated as determinative in the face of express legislative exclusions.
Leasing, Sharing, and Passive Infrastructure Models
A recurring argument in GST disputes is that ITC eligibility should change where telecom towers are not owned outright but are leased, shared, or deployed under passive infrastructure models. Telecom operators often contend that when towers are used as part of a service arrangement—such as tower sharing with multiple operators—the exclusion applicable to ownership of civil structures should not apply in the same manner.
However, as per our experience, GST authorities have consistently rejected this distinction. The nature of the asset does not change merely because it is leased or shared. Where the underlying structure remains a telecom tower classified as an immovable civil structure, the statutory exclusion under Section 17(5) continues to apply. Leasing arrangements may affect the taxability of the service component, but they do not convert an ineligible asset into eligible plant and machinery.
Further, the GST law draws a clear line between ownership or use of an asset and receipt of a taxable service. While ITC on GST charged for tower leasing services may be examined independently based on the facts, the embedded civil structure itself remains outside the ITC framework. As per our experience, attempts to reframe tower ownership issues as service transactions often fail when tested against the statutory language.
Judicial and Departmental Approach under GST
Judicial and departmental approaches under GST have largely converged on the view that telecom towers fall within a closed category of ineligible assets. Authorities have repeatedly emphasised that Section 17(5) represents a clear legislative mandate and must be applied as written. Where the statute expressly excludes civil structures and foundations, adjudicating bodies have shown limited inclination to entertain equitable or business-driven arguments.
As per our experience, departmental audits routinely flag ITC claims relating to telecom towers at an early stage, often treating them as low-hanging fruit due to settled statutory position. Appellate authorities, in turn, have generally focused on the physical and functional characteristics of towers to reaffirm their classification as immovable structures, rather than revisiting pre-GST jurisprudence.
Courts have also reinforced the principle that GST is a self-contained code and that earlier service tax rulings cannot be mechanically imported without regard to the altered legislative framework. The judicial trend reflects restraint rather than activism, recognising that policy choices embedded in Section 17 fall within the legislative domain. As per our experience, successful challenges are rare and usually confined to factual disputes rather than legal reinterpretation of the exclusion itself.
Key Takeaways
The exclusion of telecom towers from input tax credit under GST reflects a deliberate legislative choice rather than a gap in interpretation. Section 17(5) of the CGST Act, read with the Explanation defining plant and machinery, places telecom towers firmly within the category of immovable civil structures, irrespective of their commercial indispensability. Functional necessity, which once played a decisive role under the pre-GST regime, now has limited relevance where the statute speaks clearly.
As per our experience, most disputes on telecom towers arise not from ambiguity in law but from continued reliance on pre-GST judicial reasoning. GST represents a shift from judicially evolved tests to statutorily defined exclusions, and courts have increasingly respected this legislative boundary. Leasing, sharing, or passive infrastructure arrangements do not alter the inherent nature of telecom towers or dilute the statutory bar on ITC.
Taxpayers would therefore be well advised to reassess legacy assumptions and align ITC positions with the current statutory framework. Conservative classification, early identification of ineligible credits, and avoidance of aggressive functional arguments significantly reduce audit exposure and litigation risk in this area.
Points to Remember
- Input tax credit on telecom towers is expressly blocked under GST due to their classification as immovable civil structures under Section 17(5) of the CGST Act.
- Functional necessity or business indispensability is irrelevant once an asset falls within a category expressly excluded by the statute.
- Pre-GST judicial rulings allowing credit on telecom towers have limited relevance and cannot override the clear exclusions introduced under the GST framework.
- The Explanation to Section 17 defining “plant and machinery” deliberately excludes civil structures and foundations, bringing telecom towers outside the scope of eligible ITC.
- Leasing, sharing, or passive infrastructure models do not alter the inherent nature of telecom towers or dilute the statutory bar on ITC.
- GST represents a shift from judicially evolved functional tests to statutorily defined exclusions, requiring a statute-first approach to ITC analysis.
- As per our experience, most tower-related ITC disputes fail at the statutory classification stage, not on factual or usage grounds.
- Conservative classification and early identification of ineligible credits significantly reduce audit exposure and avoid unsustainable litigation.
- Telecom towers constitute a closed category for ITC under GST, with little scope for reinterpretation unless the statute itself is amended.
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- Functional Test Vs Statutory Bar Under GST: Judicial Limits
- ITC On Plant And Machinery: Civil Structures Under GST
Sources and References
- Central Goods and Services Tax Act, 2017
Section 16 and Section 17(5), read with the Explanation defining “plant and machinery”. - GST Law Committee & Legislative Materials
Explanatory notes and legislative intent underlying blocked credit provisions. - Judicial precedents under the pre-GST service tax regime
Referenced for background on functional test and treatment of telecom towers
Disclaimer
This article is intended for general informational purposes only and reflects a broad analysis of the statutory provisions and judicial trends under GST. It does not constitute legal or professional advice, and tax positions should be evaluated based on specific facts and circumstances.
