No GST ITC available on Inputs/Capital Goods/Input Services of Items used in Design, Engineering, Installation of Solar Power Plant: AAR [Read Order]
The Tamil Nadu AAR noted that no ITC could be claimed on Inputs, Capital Goods or Services Used for Solar Power Plant Setup and Maintenance
![No GST ITC available on Inputs/Capital Goods/Input Services of Items used in Design, Engineering, Installation of Solar Power Plant: AAR [Read Order]](https://images.taxscan.in/h-upload/2025/07/28/2069971-gst-itc-solar-plant-taxscan.webp "No GST ITC available on Inputs/Capital Goods/Input Services of Items used in Design, Engineering, Installation of Solar Power Plant: AAR [Read Order]")
In a crucial determination affecting renewable energy deployments in industrial setups, the Tamil Nadu Authority for Advance Ruling (AAR) has ruled that M/s Kanishk Steel Industries Limited is not entitled to claim Input Tax Credit (ITC) on inputs, capital goods, or input services used in the design, engineering, and installation of a solar power plant. The ruling also...
In a crucial determination affecting renewable energy deployments in industrial setups, the Tamil Nadu Authority for Advance Ruling (AAR) has ruled that M/s Kanishk Steel Industries Limited is not entitled to claim Input Tax Credit (ITC) on inputs, capital goods, or input services used in the design, engineering, and installation of a solar power plant.
The ruling also extends to disallow ITC on goods or services used for running and maintaining the solar plant, as the electricity generated is supplied to the grid and is considered an exempt supply under GST.
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Kanishk Steel Industries, a Chennai-based manufacturer of various steel products, had sought advance rulings on two specific questions: whether ITC could be availed on items used in setting up a 10.2 MW solar power plant, and whether ITC could be claimed for goods and services used in its operation. The company intended to use the electricity generated for captive consumption in its manufacturing facility, via credit adjustment with TANGEDCO, Tamil Nadu’s electricity utility.
The applicant contended that the solar plant constituted "plant and machinery" under GST law and the energy was used exclusively in the production of taxable goods, thereby qualifying the entire setup as part of the business. It emphasized that the capital cost had been duly recorded in the fixed asset register and relied on earlier rulings in similar cases to argue that ITC should not be disallowed.
However, the AAR rejected these contentions. It held that since the electricity is first transmitted to TANGEDCO and only then adjusted against the factory’s consumption, the energy was not being "captively consumed" but instead constituted a supply of electricity—an exempt supply under GST, as electricity falls under HSN 27160000 and is taxed at a nil rate under Notification No. 02/2017-CT(Rate).
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The AAR clarified that exempt supplies attract the bar under Section 17(2) and Rule 43 of the CGST Rules, which mandate reversal or disallowance of ITC to the extent it is used for exempt activities. Since there was no wheeling or banking agreement, the arrangement was treated as a sale to TANGEDCO followed by an adjustment, further distancing it from captive use.
Thus, GST ITC benefits cannot be availed for infrastructure or operational expenses linked to supplies that are exempt from GST, even in cases involving intra-entity energy use.
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