Solar power plant qualifies as plant and machinery under Section 17(6) CGST Act, eligible for full input tax credit.

The AAR-Kerala ruled that a rooftop solar power plant installed at commercial premises qualifies as "plant and machinery" under Section 17(6) of CGST Act, 2017, making it eligible for input tax credit (ITC). The solar plant, comprising panels, inverters, and consumables bolted to rooftops and parking areas, satisfied the legal test of being "fixed to earth by foundation or structural support." Since the solar-generated electricity was used internally for mall operations like lighting, air-conditioning, and elevators rather than being supplied to tenants, no exempt supply arose under Section 17(2). The applicant was held eligible for full ITC on the solar plant, subject to fulfilling other conditions under Section 16 of CGST Act.

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ISSUES:

Whether the procurement and installation of a rooftop solar power plant qualifies for Input Tax Credit (ITC) under Section 16(1) of the CGST Act, 2017.Whether the rooftop solar power plant qualifies as "plant and machinery" under the Explanation to Section 17(6) of the CGST Act, 2017.Whether the restrictions on ITC under Section 17(5)(c) and 17(5)(d) of the CGST Act apply to the solar power plant installed on the rooftop.Whether the use of solar-generated electricity for common area maintenance (CAM) services constitutes exempt supply attracting reversal of ITC under Section 17(2) of the CGST Act.

RULINGS / HOLDINGS:

The applicant is eligible to claim ITC on the procurement and installation of the rooftop solar power plant as it is "used or intended to be used in the course or furtherance of business" under Section 16(1) of the CGST Act, 2017.The rooftop solar power plant qualifies as "plant and machinery" within the meaning of the Explanation to Section 17(6) of the CGST Act, as it is "bolted and fixed to the rooftop and parking area using screws and anchors for structural stability" and is capitalized in the books of accounts.The solar power plant is classified as capital goods and is not an immovable property under general legal interpretation; therefore, the ITC restrictions under Section 17(5)(c) and 17(5)(d) do not apply.The electricity generated from the solar plant is used exclusively for powering taxable common area maintenance services and is not supplied or invoiced separately as electrical energy; hence, no exempt supply arises and Section 17(2) ITC reversal provisions are not attracted.

RATIONALE:

The legal framework applied includes Sections 16 and 17 of the Central Goods and Services Tax (CGST) Act, 2017, particularly Section 16(1) on eligibility of ITC, Section 17(5) on blocked credits, and the Explanation to Section 17(6) defining "plant and machinery."The court relied on the statutory definition that "plant and machinery" includes apparatus fixed to earth by foundation or structural support, excluding land, building, and other civil structures, and found the solar plant's mode of installation met this criterion.The court distinguished the solar plant from immovable property, noting it can be dismantled without major damage and is capitalized as capital goods, thereby excluding it from ITC restrictions under Section 17(5)(c) and (d).Precedent advance rulings from other jurisdictions were cited, affirming that rooftop solar plants used for business operations and capitalized in accounts qualify for ITC and are not blocked under Section 17(5)(d).The interpretation of Section 17(2) was applied to exclude ITC reversal since the solar-generated electricity is not separately supplied but used internally to provide taxable CAM services, negating the classification as exempt supply under Notification No. 2/2017-Central Tax (Rate).

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