Telecom service providers and tower infrastructure players said the Supreme Court judgement on Input Tax Credit for telecom towers will significantly improve the telecom industry's financial health, enabling accelerated deployment of digital infrastructure across India.
They said that the judgement will release substantial working capital that can be strategically reinvested in infrastructure development while reducing the overall cost of service delivery across the sector.
In a significant win for the telecom industry, the Supreme Court ruled on November 20 that service providers can claim Cenvat credits on central excise duties paid for essential telecom infrastructure, including towers, green shelters, prefabricated buildings (PFBs), and other related materials.
In a 76-page judgment, the Supreme Court overturned the Bombay High Court's 2014 ruling, which had classified mobile towers and green shelters as "immovable property." Instead, the Court deemed them as “goods,” qualifying them as “inputs” under Rule 2(k) of the CENVAT Credit Rules. This ruling enables mobile service providers (MSPs) to claim Cenvat credit for excise duties paid on these items.
The case concerned whether MSPs could claim Cenvat credit on excise duties paid for infrastructure such as mobile towers and peripherals used in their operations. The issue had previously seen conflicting decisions from the Bombay and Delhi High Courts. While the Bombay High Court had ruled against granting Cenvat credit on mobile towers and prefabricated buildings (PFBs), the Delhi High Court had ruled in favour of MSPs. Both rulings were challenged before the Supreme Court.
“Through this landmark judgement, while upholding the Delhi High Court's decision in our favour, the Supreme Court has allowed CENVAT credit inter-alia on towers and shelters. This pivotal ruling will positively impact our Company's financial exposure. With this favourable outcome and a settled tax position, we are poised to continue advancing digital infrastructure growth across the country,” Prachur Sah, MD & CEO of Indus Towers, said in a statement.
"This is a significant positive outcome for the company and will result in a reduction of Rs 37,044 Mn (Rs 3,704.4 crore) in contingent liability," Indus Towers also said in an exchange filing.
The Cellular Operators Association of India (COAI), which represents Reliance Jio, Bharti Airtel, and Vodafone Idea, said the apex Court's judgement will not only help the industry fulfil the compliance but also reduce the financial burden on the sector.
“By confirming to the view of the Hon’ble Delhi High Court, this verdict reinforces fairness and consistency in taxation. We await the detailed judgement for further clarity on its implementation,” said S.P. Kochhar, Director General, COAI.
The Digital Infrastructure Providers Association (DIPA), the association of tower infrastructure companies, said the judgement will significantly improve the financial health of infrastructure providers, enabling them to accelerate the deployment of digital infrastructure across India.
“The ruling will have far-reaching implications for the sector's growth trajectory, delivering multiple transformative benefits to India's digital infrastructure landscape. The judgement will release substantial working capital that can be strategically reinvested in infrastructure development while simultaneously reducing the overall cost of service delivery across the sector,” said Manoj Kumar Singh, Director General of DIPA.
Singh said that this financial flexibility will enable faster deployment of digital infrastructure in underserved areas, addressing critical connectivity gaps in rural and remote regions.
“This comes at a crucial time when our nation is rapidly advancing toward 5G expansion, digital transformation and the accelerated commercialisation of the 6G stack,” he added.
The Supreme Court's decision clarifies that excise duties paid on purchasing and installing mobile towers and related parts, which were previously denied, can now be offset against the service tax on telecommunication services.
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