PwC seeks clarity on GST input tax credit for data centre construction
New Delhi, Dec 24, 2025
PwC has urged the government to clarify whether hyperscale data centre infrastructure qualifies as plant and machinery for GST input tax credit, and to address PE and SEP risks for overseas players
The government should provide clarity on whether the infrastructure of hyperscale data centres qualifies as ‘plant and machinery’ or civil structures, to help them be eligible for Input Tax Credit (ITC) on construction-related activities, tax advisory firm PwC has recommended.
Data centres have unique operational requirements, operate with integrated infrastructure, and are purpose-built so they cannot be repurposed for any other use, PwC said.
“In the specific case of co-location data centre service providers, an additional argument can be advanced that construction is not ‘on own account’ where output is the taxable leasing/renting of space, racks, and related infrastructure. Together with the plant-and-machinery carve-out, this supports the position that ITC should be available for such outward leasing supplies,” PwC said.
To boost data centre growth in India, the government should also consider introducing a more favourable depreciation regime, as these facilities are built to optimise the performance and security of digital infrastructure.
Given the cross-border nature of cloud services, the government should also provide clarity around the characterisation of data centres transactions, on whether they fall under the category of royalty to the parent company or will be categorised as a fee for technical services, PwC recommended.
“In a few instances, concerns have been raised that foreign entities may have a PE in India, and therefore, there should be profit attribution. This may expose the non-resident entity to uncertainty around profits taxable in India,” the tax advisory firm said.
Apart from these, PwC has also recommended that the government amend the significant economic presence (SEP) framework, as the current threshold of ~2 crore in revenue or 300,000 users for taxing non-resident enterprises may be too low for data centre companies.
“These areas, particularly the risk of creating a PE and exposure to SEP, are especially salient for overseas players establishing data centres in India, and should be evaluated against India’s broader digital ambition to position itself as a trusted global hub for data infrastructure, cloud services, and cross-border digital trade,” PwC said.
[The Business Standard]
