AAR: Under GST, Input Tax Credit Can Be Availed On Rooftop Solar System

AAR: Under GST, Input Tax Credit Can Be Availed On Rooftop Solar System

Observes that the unit is not an immovable property and does not fall in blocked credit under the CGST Act

The Gujarat Authority of Advance Ruling (AAR) has ruled that roof-top solar systems with installation and commissioning constitute plant and machinery.

The Bench of Amit Kumar Mishra and Riddhesh Raval observed that the applicants were eligible to avail of the Input Tax Credit (ITC) on rooftop solar systems (with installation and commissioning) under the Goods and Services Tax (GST) Act.

The applicant is engaged in the business of manufacturing and selling welding wires in Anand, Gujarat. It supplies products and services after discharging 8 percent GST. It entered an interconnection agreement with the power distribution licensee (Madhya Gujarat Vij Company Ltd) for the captive use of power generated by rooftop solar systems.

Recently, the applicant installed a rooftop solar system with a capacity of 440 KW (AC) on the factory roof for power generation. It stated that the generated power was solely and captively used for manufacturing welding wires within the premises.

The dealings of the applicant constitute 'business' as per Section 2(l7) of the Central Goods and Services Tax (CGST) Act, 2017. In terms of Section 16(1), the applicant was eligible for ITC benefit on any supply of goods or services used or intended to be used during the furtherance of the business.

It submitted being eligible for ITC on inputs, input services, and capital goods used for the erection, commissioning, and installation of rooftop solar power plants.

The issue raised was whether the applicant was eligible to take ITC as 'inputs/capital goods' or 'input services' on the purchased rooftop solar system under Sections 16 and 17 of the GST Act.

Another issue was whether the rooftop solar system constituted the plant and machinery of the applicant. Those were used in the business of manufacturing welding wires, and hence not blocked under Section 7(5).

The AAR noted that the solar plant, affixed to the roof of the building, was not embedded in the earth. It was not an immovable property, but a plant and machinery utilized to generate electricity. The same was solely used in the manufacture of welding wires. The applicant also paid GST at the applicable rates.

The Authority thus ruled that since the roof solar plant was not permanently fastened to the building, it qualified as a plant and machinery and was not an immovable property. As it was not covered under blocked credit as mentioned in Section 17(5)(d) of the CGST Act, the applicant was eligible for ITC.