SC's tax credit ruling gives relief to telcos

Overturns 2014 verdict denying telecom firms credits for these items

- Krishna Yadav & Gulveen Aulakh

In a significant victory for telecom companies, the Supreme Court (SC) on Wednesday ruled in favour of Bharti Airtel Ltd and other operators, allowing them to claim central value-added tax (Cenvat) credits on duties paid for key infrastructure items such as tower components, shelters and other related materials.

This decision overturned a 2014 ruling by the Bombay High Court (HC), which had classified these items as non-capital goods, and thereby denied telecom companies the ability to claim the credit.

The ruling by the bench of justices B.V. Nagarathna and N. Kotiswar Singh on Wednesday aligns with the views taken by various high courts, including a 2018 judgment by the Delhi HC favouring the telcos' claim over credit, but differed from the stance of the Bombay HC.

This ruling is seen as a major win for Bharti Airtel, Vodafone Idea, Reliance Communications, Tata Teleservices and Indus Towers, granting them the right to claim tax credits.