2021 (8) TMI 141 - AAR - GST

Eligibility for Input Tax Credit on Solar Plant Services under CGST Act

In Re: M/s. KLF Nirmal Industries Private Limited

The applicant is eligible to claim input tax credit amounting to Rs. 8,47,458/- for the GST paid on the EPC services of the 265KW rooftop solar power ... Input Tax Credit - inputs/capital goods/input services - items used in Design, Engineering, Supply, Execution (EPC) of 265KW Roof top Grid Solar PV Power Plant as per MNRE 8v IEC Standards - credit for inputs and services for running the solar plant - HELD THAT:- The applicant is admittedly engaged in the manufacture of goods. Electric Energy is classified under TH No. 27160000 of the First Schedule to the Customs Tariff Act, 1975 and hence, Electric Energy is considered as goods. Accordingly, Electric power is one of the inputs required for carrying out the process of manufacturing. Further, in terms of SI.No.104 of Notification No. 02/2017(Rate) dated 28.06.2017, electrical energy is exempted from tax under CGST Act, 2017. However, in the case of the Applicant, though electric energy is fully exempted under GST, the same is going to be fully capitively consumed by the applicant for manufacture and supply of taxable goods viz. Edible oils as certified by the order issued by the Tamil Nadu Generation and Distribution Corporation Ltd. In the case at hand, the whole designing, engineering, supplying and installation have been done as works contract and as the said solar power plant being Plant and Machinery, the related Credits are not blocked under this Section - While the purchase order has been raised on M/s. KCP Solar Power Industry for Design, Engineering, supply & Execution (EPC) of 264.5 KW Roof Top Grid-Tie Solar PV Plant as per MNRE& IEC Standards using solar wedge invertor, the grouping under Gross Block Plant& Machinery and claim of credit on the goods/services grouped under such plant and machinery is not substantiated thus not satisfying explanation under Section 17 (5). As the entire set up of the solar power plant is vested with M/s. KCP Solar Industry, and has been installed by them, the work executed under Invoice invoice no 135/20-21 dated 10.9.2020 alone qualifies as Plant& Machinery and the credit of GST paid in the said invoice amounting to ₹ 8,47,458/- is alone not blocked under this section and hence available as credit. The applicant has entered into works contract for design, engineering and installation along with supply of solar power panel for an agreed consideration of ₹ 1,03,69,458/- which includes the tax of ₹ 8,47,458/. They have procured the said product for use in their business and they have also stated that the entire amount excluding the GST component has been capitalised thereby deprecation on the GST element has not been claimed for which they have produced documentary evidences - the applicant is eligible for availing input tax credit as inputs/capital goods or input services of the items used in Design, Engineering, Supply, Execution (EPC) of 265KW Roof top Grid Solar PV Power Plant as per MNRE & IEC Standards procured from M.s KCP Solar Industries as they have been found to comply with the provisions of Sections 16 (1) and (2), 17 (5) of the CGST Act,2017 and that they are found to be using the electricity so generated captively only in the process of manufacture of edible oils, which is a taxable commodity. Eligibility for input tax credit for inputs and services for running the solar plant - HELD THAT:- It is seen that they have not furnished the list of inputs and services that will be used in running the solar plant as they have done for the capital goods vide Appendix-A and elaborated it with the Fixed Assets and Work-in-progress register. They have not even attempted to substantiate their stand in this regard - ruling cannot be passed on this issue for want of valid inputs. Application disposed off. Issues Involved:1. Eligibility to take input tax credit (ITC) on inputs/capital goods or input services used in the Design, Engineering, Supply, Execution (EPC) of a 265KW Roof Top Grid Solar PV Power Plant.2. Eligibility to take input tax credit for inputs and services for running the solar plant.Detailed Analysis:Issue 1: Eligibility to Take ITC on Inputs/Capital Goods or Input Services for EPC of Solar Power PlantThe applicant, engaged in the business of extracting and processing edible oils, has installed a captive rooftop solar power plant to generate electricity for its operations. The main question is whether the applicant can claim ITC on the inputs, capital goods, or input services used in the EPC of the solar plant.The applicant has provided necessary documents, including purchase orders, invoices, and compliance with GST rules. The solar power plant has been capitalized in the books of accounts, and the GST component has not been depreciated, fulfilling the conditions under Section 16(3) of the CGST Act, 2017. The electricity generated is used exclusively for manufacturing taxable goods, making it eligible for ITC under Section 16(1) and (2).The ruling clarifies that the solar power plant qualifies as 'plant and machinery' under the GST Act. The related credits are not blocked under Section 17(5) since the installation is considered a works contract for plant and machinery. Therefore, the applicant is eligible to claim ITC amounting to Rs. 8,47,458/- for the GST paid on the EPC services provided by M/s. KCP Solar Industry.Issue 2: Eligibility to Take ITC for Inputs and Services for Running the Solar PlantThe applicant sought a ruling on the eligibility to claim ITC for inputs and services used in running the solar plant. However, the applicant did not furnish specific details or a list of such inputs and services. Due to the lack of substantiation, the authority refrained from passing a ruling on this matter.Conclusion:1. Eligibility to Take ITC on EPC of Solar Power Plant: The applicant is eligible to claim ITC amounting to Rs. 8,47,458/- for the GST paid on the EPC services of the 265KW rooftop solar power plant provided by M/s. KCP Solar Industry, as it complies with the provisions of Sections 16(1), (2), and 17(5) of the CGST Act, 2017.2. Eligibility to Take ITC for Running the Solar Plant: No ruling is pronounced due to the absence of detailed information on the inputs and services proposed to be used for running the solar plant.