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of <h1>Solar power plant qualifies as plant and machinery under Section 17(6) CGST Act, eligible for full input tax credit.</h1> <h3>In Re: M/s. Grand Centre Mall</h3> 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, ... Eligibility to claim ITC - procurement and installation of a rooftop solar power plant at its commercial premises - scope of “plant and machinery” as defined in the Explanation to Section 17(6) of CGST Act, 2017 - whether such usage-together with the nature and manner of installation of the solar plant-qualifies the applicant for input tax credit under Section 16(1) of the CGST Act, 2017? - HELD THAT:- In the present case, the solar plant-comprising solar panels, inverters, and consumables-is bolted and anchored to the rooftop and parking area using screws and structural supports. This mode of installation satisfies the legal test of being “fixed to earth by foundation or structural support”. What all the plant requires is sufficient exposure to sunlight and the building or parking structure to which it is affixed may itself be construed as the structural support. Hence, the plant qualifies as “plant and machinery” under the Explanation to Section 17(6) of the CGST Act. Consequently, the solar power plant falls squarely within the ambit of both “capital goods” and “plant and machinery”, and is therefore not covered by the restrictions placed under Section 17(5)(c) and 17(5)(d). Accordingly, we are of the considered opinion that there is no bar under GST law on availing ITC on the rooftop solar power plant installed by the applicant, subject to fulfilment of the other conditions laid down in Section 16 of the CGST Act. The eligibility for such ITC in full or part is subject to the conditions stipulated under Section 17 (2) of the CGST Act, 2017. It is pertinent to. examine the applicability of Section 17(2) of the CGST Act, 2017, which mandates reversal or restriction of input tax credit (ITC) to the extent inputs or capital goods are used for making exempt supplies. “Electrical energy” is classified as an exempt supply under SI. No. 104 of Notification No. 2/2017-Central Tax (Rate), dated 28.06.2017, under HSN 2716. Ordinarily, where electricity generated from a solar power plant is supplied or invoiced separately to other persons, such supply constitutes an exempt supply, thereby attracting the provisions of Section 17(2) and necessitating proportionate ITC reversal. However, as per the written submission furnished by the applicant vide letter dated 19.05.2025, each shop within the mall has a separate electricity connection in the name of the respective licensee (tenant), and the licensees individually pay their electricity bills directly to the Kerala State Electricity Board (KSEB). The applicant does not supply or invoice electricity to the tenants in any form. The electricity generated from the rooftop solar power plant is entirely used for powering the mall's common facilities such as lighting, air-conditioning, elevators, CCTV systems, UPS systems, and other shared infrastructure. Thus, it is evident that the solar-generated electricity is not supplied or sold as electrical energy, but is instead used internally and integrally for the provision of taxable CAM services. Therefore, no exempt supply arises from the usage of the solar plant, and the provisions of Section 17(2) of the CGST Act are not attracted. The applicant shall be eligible to avail ITC on the solar power plant, subject to fulfillment of the other conditions prescribed under Section 16 of the CGST Act, 2017. 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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