Solar power panels used for exempt electricity supply to TANGEDCO not eligible for input tax credit under Section 17(2)

The AAAR TN held that the appellant was not entitled to input tax credit on solar power panels used for electricity generation. The authority determined that since electricity supplied to TANGEDCO was exempt from GST under notification, the solar panels were used exclusively for exempted supply. Under Section 17(2) of CGST Act read with Rule 43(1)(a), ITC is not available for inputs used exclusively for exempt supplies. The AAR's jurisdiction question regarding blocked credit under Section 17(5)(c) and (d) was deemed irrelevant as appellant's activity didn't fall within those provisions. The supply chain breaks at the exempt supply point, disqualifying ITC eligibility.

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Issues Involved:

1. Eligibility of Input Tax Credit (ITC) on solar power panels under Section 17(5)(c) and (d) of CGST/TNGST Act, 2017.
2. Jurisdiction of the Authority for Advance Ruling (AAR) in delivering a ruling on apportionment of credit under Section 17(2) of CGST Act, 2017.

Summary:

Issue 1: Eligibility of Input Tax Credit on Solar Power Panels

The Appellant, a partnership firm engaged in the maintenance of immovable property, sought clarification on whether the input tax credit on solar power panels procured and installed is blocked credit under Section 17(5)(c) and (d) of CGST/TNGST Act, 2017. The Original Authority ruled that the Appellant is not eligible for ITC on goods/services used in the installation of solar power panels, which are considered as plant and machinery, as per Section 17(2) of the CGST/TNGST Act read with Rule 43(a) of CGST/TNGST Rules 2017.

Issue 2: Jurisdiction of AAR in Delivering a Ruling on Apportionment of Credit

The Appellant contended that the AAR exceeded its jurisdiction by delivering a ruling on the apportionment of credit under Section 17(2) of the CGST Act rather than addressing the specific question of blocked credit under Section 17(5). The Appellate Authority noted that the question raised before the AAR was about the admissibility of ITC, which falls under Section 97(2)(d) of the Act. However, the AAR examined the issue in totality and ruled that the ITC is not admissible ab initio under Section 17(2) of the Act, as the solar power panels are used for generating electricity, an exempt supply.

Findings and Conclusion:

The Appellate Authority upheld the AAR's decision, emphasizing that the ITC on solar power panels is not admissible under Section 17(2) of the Act, as the electricity generated is an exempt supply. The Authority also clarified that the provisions of Section 17(5)(c) and (d) are not relevant to the case, as the Appellant is not involved in the construction of immovable property. The Appellant's arguments regarding the separation of the partnership firm and property owners under civil law were dismissed, as the GST law treats them as separate legal entities.

Ruling:

The Appellate Authority upheld the decision of the Authority for Advance Ruling of Tamil Nadu, vide AAR Order No. 33/AAR/2022 dated 31.08.2022, and rejected the appeal.

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