GST ITC Can Be Availed On Roof Top Solar System As It Constitute Plant And Machinery: AAR

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 has observed that applicants are eligible to avail of ITC on rooftop solar systems with installation and commissioning under the GST Act.

The applicant is engaged in the business of manufacturing and selling welding wires. The applicant supplies its products and services after discharging 8% GST. The applicant has entered into an interconnection agreement with the power distribution licensee (Madhya Gujarat Vij Company Ltd.) for the captive use of power generated by rooftop solar systems. The applicant has recently installed a rooftop solar system with a capacity of 440 KW (AC) on the factory roof for power generation. The applicant stated that the generated power is solely and captively used for manufacturing welding wires within the same premises.

The applicant's business of manufacturing and selling welding wires from their manufacturing plant in Anand constitutes 'business' as per Section 2(l7) of the CGST Act, 2017. In terms of Section 16(1), the applicant is eligible for the benefit of ITC on any supply of goods or services that are used or intended to be used in the course of furtherance of business.

The applicant submitted that they are eligible for ITC on the 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 is eligible to take ITC as 'inputs/capital goods' or 'input services' on the purchased rooftop solar system with installation and commissioning in terms of sections 16 and 17 of the GST Act.

Yet another issue raised was whether the rooftop solar system with installation and commissioning constitutes the plant and machinery of the applicant, which are used in the business of manufacturing welding wires, and hence not blocked input tax credit under Section 7(5).

The AAR noted that the roof solar plant, affixed to the roof of the building, is not embedded in the earth. It is not an immovable property but a plant and machinery that is utilized to generate electricity, which is further solely and captively used in the manufacture of welding wires. The applicant is engaged in the business of supplying welding wires on the payment of GST at the applicable rates.

The AAR ruled that the roof solar plant is not permanently fastened to the building. Thus, it qualifies as a plant and machinery and is not an immovable property; hence, it is not covered under blocked credit as mentioned in 17(5)(d) of the CGST Act, 2017. Therefore, the applicant is eligible for input tax on roof solar plants.

Applicant's Name: Unique Welding Products P. Ltd.

Click Here To Read The Ruling