Gujarat AAR Approves GST ITC Eligibility for Rooftop Solar Plants, Not Comes Under Immovable Property

The Gujarat Authority of Advance Ruling (AAR) has determined that rooftop solar systems, inclusive of installation and commissioning, are considered plant and machinery.

In the assessment conducted by the bench comprising Amit Kumar Mishra and Riddhesh Raval, it has been concluded that applicants have the entitlement to claim Input Tax Credit (ITC) on rooftop solar systems, including installation and commissioning, as per the provisions of the GST Act.

The applicant operates in the manufacturing and sale of welding wires. Their products and services are supplied after an 8% Goods and Services Tax (GST) is discharged.

The applicant has established an interconnection agreement with the power distribution licensee, Madhya Gujarat Vij Company Ltd., for the exclusive use of power generated by the rooftop solar systems for captive consumption.

Having recently installed a rooftop solar system with a capacity of 440 KW (AC) on the factory roof for power generation, the applicant clarified that the generated power is entirely and exclusively used for the captive production of welding wires within the same premises.

The manufacturing and sale of welding wires conducted by the applicant at their manufacturing plant in Anand are recognized as a ‘business’ according to Section 2(17) of the CGST Act, 2017.

Under Section 16(1), the applicant is entitled to ITC for any supply of goods or services utilized or intended to be used while furthering their business.

The applicant has asserted their eligibility for Input Tax Credit on inputs, input services, and capital goods employed in the erection, commissioning, and installation of rooftop solar power plants.

Read Also:- Summary of GST Section 16 Under CGST Act with Eligibility

The primary concern was whether the applicant could claim ITC categorizing the purchased rooftop solar system with installation and commissioning under ‘inputs/capital goods’ or ‘input services,’ per sections 16 and 17 of the GST Act.

Another issue raised was whether the rooftop solar system, along with its installation and commissioning, qualifies as the plant and machinery of the applicant, deployed in the business of manufacturing welding wires, thereby not falling under the category of blocked input tax credit as per Section 7(5).

The Authority for Advance Ruling observed that the rooftop solar plant, attached to the building’s roof, lacks integration with the ground, distinguishing it as not an immovable property but rather a plant and machinery.

This machinery is employed for electricity generation, exclusively and captively utilized in the production of welding wires. The applicant is actively involved in supplying welding wires, subject to GST payments at the prevailing rates.

The AAR’s verdict clarified that the rooftop solar plant isn’t permanently affixed to the building, categorizing it as a plant and machinery rather than an immovable property.

Consequently, it falls outside the purview of blocked credit specified in Section 17(5)(d) of the CGST Act, 2017. Therefore, the applicant is entitled to claim input tax credits on rooftop solar plants.