The Maharashtra Authority of Advance Ruling (AAR) in the case of M/s Mumbai Aviation Fuel Farm Facility Private Limited vide Advance Ruling No. GST-ARA-126/2019-20/B-107 dated 01.12.2022, has held that Input Tax Credit (ITC) is not available on goods and services used for the construction of a pipeline laid outside the factory premises.

In this case, the applicant Mumbai Aviation Fuel Farm Facility Private Limited (MAFFPL), is in the business of providing fuel infrastructure services wherein the ATF of oil PSUs is stored in storage tanks. The Applicant is setting up Connector Pipeline for Fuel Hydrant System at CSIA, Mumbai. With the help of the Fuel Hydrant System, fuel is supplied to the airlines. 

The Applicant submitted that the laying of connector pipelines and associated works is an important component of the fuel hydrant system and without which this activity, the fuelling to the airlines will not take place. The area of project site is under the License Agreement with Mumbai International Airport Limited (MIAL) for which the applicant pays license fee to MIAL. For laying connector pipeline up to airside, the specific approval is obtained from MIAL. Further, it is submitted that the out of total length of the Connector Pipeline, approximately 10% of the pipeline falls in the area licensed to the applicant and the rest of the pipeline length falls in the area which is outside the project. 

The applicant sought an advance ruling on the issue of whether, where inputs are consumed in the construction of immovable property outside MAFFFL's licensed premises, which are meant and intended to be for the provision of taxable output services, the input tax credit was available to the assessee.

The AAR has noted that the applicant has failed to establish how it is entitled to ITC in the presence of the express legal bar to claiming such ITC.  As per the explanation to Section 17 of the CGST Act, 2017, Plant and Machinery does not include a pipeline laid outside the factory premises. Accordingly, the ITC of goods and services used for construction of a pipeline laid outside the factory premises is not available in terms of Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017.

Further, to the contention of the applicant ‘that the project site is not a factory, so the impugned clause is not applicable to it and the ITC is available to them', the AAR relied that “However, what is important is the spirit of law and the facts of the case. So after considering the facts in totality and the legal provisions, we are of the view  that there is no merit in such arguments.”

The AAR observed that apart from the entitlement of ITC with respect to 90% of the pipeline outside their premises, there is no other issue involved in the present case. The Authority held that the GST ITC is not available where inputs are consumed in the construction of immovable property outside MAFFFL's licensed premises.