Assessee eligible to claim ITC on rooftop solar system used in course or furtherance of business

By:

The Gujarat AAR in the case of In Re: M/s. Unique Welding Products Pvt. Ltd. [GUJ/GAAR/R/2024/01 dated January 05, 2024] held that Assessee is eligible to claim Input Tax Credit (“ITC”) on rooftop solar system with installation and commissioning service used in the course or furtherance of business, as it would be considered as plant and machinery, therefore, would not fall within the purview of blocked credit under Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

Facts:

M/s. Unique Welding Products Pvt. Ltd. (“the Applicant”) is engaged in the business of manufacturing and sale of welding wires. The Applicant entered into an interconnection agreement with power distribution licensee for use of power generated by rooftop solar system. The Applicant has installed a rooftop solar system on factory roof for power generation. The generated power is solely and captively used for manufacturing within the same premises.

The Applicant has filed an application for advance ruling on whether rooftop solar system with installation and commissioning would constitute within the purview of plant and machinery and therefore, eligible to take ITC as input/capital goods or input services.

Placing reliance upon the provisions of Section 2(63), 2(59), 16, and 17 of the CGST Act, the Applicant submits that the Petitioner is eligible to claim ITC on input services and capital goods used for erection, commissioning and installation of rooftop solar power plant.

Issue:

Whether Assessee is eligible to claim ITC on rooftop solar system used in the course or furtherance of business?

Held:

The AAR, Gujarat in the case of GUJ/GAAR/R/2024/01 held as under:

  • Noted that, the Applicant would be installing Roof Solar Plant on factory roof to generate electricity which would be solely used for the purpose of manufacturing welding wires within the same premises.
  • Noted that, the roof solar plant, affixed on the roof of the building is not embedded to earth. Therefore, the solar plant affixed on roof is not an immovable property but a plant and machinery, which is solely and captively used in the manufacturing of welding wires.
  • Opined that, the Roof Solar Plant not permanently fastened to earth, would be considered as plant and machinery, not immovable property. Therefore, as per Section 17(5)(d) of the CGST Act, it would not be covered within the purview of blocked credit.
  • Held that, the Applicant is eligible to avail ITC on rooftop solar system with installation and commissioning service.

Relevant Provision:

Section 17(5)(d) of the CGST Act:

17: Apportionment of credit and blocked credits.

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-

(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

(Author can be reached at info@a2ztaxcorp.com)

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