Rooftop solar system qualifies as plant and machinery, not immovable property, allowing input tax credit under section 17(5)(d)

AAR Gujarat ruled that a rooftop solar system with installation and commissioning constitutes plant and machinery rather than immovable property under GST law. The solar plant, affixed to the building roof but not embedded to earth, generates electricity used captively in manufacturing welding wires. Since it is not permanently fastened and is capitalized as plant and machinery, it does not fall under blocked credit provisions of section 17(5)(d) of CGST Act 2017. The applicant is eligible for input tax credit on the rooftop solar system.

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Issues Involved:
1. Eligibility for Input Tax Credit (ITC) on rooftop solar system under sections 16 and 17 of the CGST/GGST/IGST Act.
2. Classification of the rooftop solar system as plant and machinery and its exclusion from blocked ITC under section 17(5) of the CGST/GGST/IGST Act.

Summary:

Issue 1: Eligibility for ITC on Rooftop Solar System
The applicant, engaged in the manufacturing and sale of welding wires, installed a 440 KW rooftop solar system for captive power use. They sought an advance ruling on whether they could claim ITC on the inputs, input services, and capital goods used for the installation and commissioning of the rooftop solar system under sections 16 and 17 of the CGST/GGST/IGST Act. The applicant argued that their business activities qualify as 'business' under section 2(17) of the CGST Act, and thus, they are eligible for ITC on supplies used in the course or furtherance of business.

Issue 2: Classification as Plant and Machinery
The applicant contended that the rooftop solar system should be classified as 'plant and machinery' and not as immovable property, hence not falling under blocked credits as per section 17(5)(d) of the CGST Act. They provided evidence including photographs, financial statements, and an interconnection agreement with Madhya Gujarat Vij Company Ltd (MGVCL). The solar plant is bolted to the factory roof and can be dismantled and sold, indicating it is not permanently fastened and thus not immovable property.

Discussion and Findings:
The Authority examined the relevant sections of the CGST Act and the submissions made by the applicant. They noted that the rooftop solar system is not embedded to earth and qualifies as plant and machinery. The electricity generated is solely used for manufacturing within the same premises, and the solar system is capitalized in the applicant's books of accounts, confirming it is not an immovable property.

Ruling:
1. The applicant is eligible to avail ITC on the rooftop solar system with installation and commissioning under the CGST/GGST Act.
2. The rooftop solar system constitutes plant and machinery of the applicant and is not blocked ITC under section 17(5) of the CGST/GGST Act.

The ruling was further substantiated by a similar decision in the case of M/s. The Varachha Cooperative Bank Limited, Surat.

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