GST: Goods/ Services for Installation of Solar Power Panel are Plant and Machinery, ineligible for ITC, rules AAR [Read Order]

The Tamil Nadu Authority for Advance Ruling (AAR) held that the applicant, VBC Associates is not eligible for claim of Input Tax Credit (ITC), as per Section 17 (2) of the CGST /TNGST Act read with Rule 43(a) of CGST /TNGST Rules 2017, on the Goods/Services used in installation of Solar Power Panels, which are considered as Plant and Machinery.

The applicant has sought advance ruling on whether the input tax credit on solar power ruling is required panels procured and installed is blocked credit under section 17(5) (c) and (d) of CGST/TNGST Act, 2017 and admissibility of Input tax credit of tax paid or deemed to have been paid.

The applicant is a Partnership Firm in the business of maintenance of an immovable property and provide the services of maintenance of immovable property, covered under the main SAC 9972. The applicant, on a monthly basis, raises an invoice for 'EB and DG charges', to the tenants.

The applicant has stated that the Tamil Nadu Electricity Board ('TNEB') for the building as a whole an incurs the expenses of running the DG, along with any other expenses incurred by the applicant for the business and claims ITC charged by the applicant's supplier, on the inward supplies of the applicant.

The applicant stated that due to composite nature of the supply, the outward supply made by them is a taxable supply of services, and consequently, they have charged taxes on the Electricity charges and DG charges (EB and DG charges) which is being recovered from the tenant. Accordingly, GST is charged on the entire amount as a composite supply.

The applicant has paid for the net units consumed after deducting energy units generated by Solar Power Plant. However, the applicant has recovered amount through separate invoice, for the gross energy units consumed by the tenants in the building at the rate charged by TNEB, which implies that the generated by Solar Power Plant are sold by the applicant to the tenants on their own account.

In the instant case 92184 gross units were consumed and billed by applicant to the tenants. After adjusting captive generated units by Solar Power Plant and wheeled by TNEB against wheeling charges, the applicant has paid to TNEB for 5280 units supplied by TNEB.

Electrical is goods classified under HSN 2706 and exempted under Notification No.02/2017 CT(R) dated 28.06.2017 vide Sl. No. 104. Therefore, electrical energy generated by Solar Panel installed by the applicant is exempted goods supplied to tenants and consequently input tax paid on the Solar Panels are ineligible as credit of input tax on Capital Goods used exclusively for supply of exempted supply are not eligible under Section 17(2) read with Rule 43(a).

The Two member bench of the Authority comprising TG Venkatesh and K Latha observed that goods/ Services for installation of Solar Power Panel are Plant and Machinery, ineligible for ITC.

To Read the full text of the Order CLICK HERE

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