GST ITC on Railway Sidings: Comprehensive Guide for Finance

Navigating Input-Tax Credit (ITC) on Private Railway Sidings under the CGST Regime

1. Statutory Premise

1. Section 16(1), CGST Act, 2017 – Confers an accrued right to ITC on any inward supply utilised in the course or furtherance of business.

2. Section 17(5)(c) & (d) – Erect a negative list that blocks credit on (i) works-contract services for construction of immovable property on one’s own account, and (ii) any goods or services used for such construction, save and except “plant and machinery”.

3. Explanation to Section 17 – Defines plant and machinery inclusively, yet expressly excludes “pipelines and foundations laid outside the factory.” Because “railway siding” is not enumerated, the pivotal issue is whether it qualifies by functionality notwithstanding its embedment.

CFO’s touchstone: In every brief test first, whether the siding is a mere civil structure (blocked) or an operational asset integral to outward or inward supply (credit-eligible).

2. Precedential Matrix

3. Core Points of Contention

1. Works-Contract Embargo – EPC contracts for a siding fall within works-contract (s 2(119)); where executed on own account, ITC is prima facie blocked under s 17(5)(c).

2. Immovability Allegation – The Department typically cites the AAAR (NMDC, 2019) to classify sidings as immovable and thus excluded.

3. Retrospective Amendment (Finance Act 2025) – Proposed substitution of “plant or machinery” with “plant and machinery” retroactive to 1-7-2017 aims to dilute the functionality doctrine; constitutional validity remains to be tested.

4. Advisory for Drafting and Litigation

5. Evidentiary Dossier to Maintain

1. Technical Certificates – Engineer’s report certifying siding as integral material-handling equipment.

2. Revenue Nexus – Correlate siding throughput with GST-taxable turnover (GSTR-1).

3. Invoice Trail – Ensure every supply feeding the siding surfaces in GSTR-2B to pre-empt “mismatch” objections.

4. Third-Party Usage Agreements – If siding is leased or used for chargeable wagon-loading, retain GST-paid contracts to negate “own-account” bar.

6. Strategic Takeaways for Young Advocates

• Functional-use over form remains the dominant Supreme-Court doctrine—deploy it vigorously unless Parliament’s 2025 amendment survives constitutional scrutiny.

• Document-centric practice is indispensable: the fate of ITC often turns on contemporaneous records rather than post-hoc explanations.

• Stay abreast of policy shifts—the GST Council’s stance on infrastructure credits is fluid; timely advisory to clients can avert protracted litigation.

• Be ready to escalate—where credit quantum is material, advise clients to pursue writ remedies; High-Court jurisprudence (e.g., Aditya Cement) has proven sympathetic.

Conclusion

Mastery of input-tax jurisprudence on railway sidings demands a synthesis of statutory exegesis, functional-use precedent, and meticulous evidentiary preparation. By internalising the ratios set out above and by structuring contracts and pleadings accordingly, the young practitioner can transform a seemingly blocked credit into a defensible—and often recoverable—claim. In conclusion, the journey to mastering input-tax jurisprudence on railway sidings is a continuous process of learning, adaptation, and strategic planning.

Case Laws:

1. Aditya Cement Vs Union Of India [(2008) 221 ELT 362 (Rajasthan HC)]

2. Jawahar Mills Ltd. Vs Commissioner Of C. Ex. [(2001) 132 ELT 3 (Supreme Court)]

3. Jayaswal Neco Ltd. Vs Commissioner Of Central Excise [(2025) 319 ELT 247 (Supreme Court)]

4. J.K. Cotton Spg. & Wvg. Mills Co. Ltd. Vs Sales Tax Officer [(1997) 91 ELT 34 (Supreme Court)]

5. Ultratech Cement Ltd. Vs Commissioner Of Cus. & C. Ex  [(2016) 339 ELT 127 (Tribunal Hyderabad)]

6. Rajasthan Spinning & Weaving Mills Ltd. Vs Commr. Of C. Ex. [(2010) 255 ELT 481 (Supreme Court)]

7. I.C.B. Pvt. Ltd. vs Collector Of Central Excise, Baroda [(1997) 95 ELT 239 (CEGAT New Delh)]