ITC on new Solar Panel purchased

[gvenugopal g]

Dear Experts,

Warm Greetings!

Entire spinning mills already given for rent containing Machines (spindles) and land & building and we raises GST Tax invoices every month for the 'rent for building (HSN # 997212)' and 'rent for Machines (HSN # 997314)'.

Solar Panel purchased and installed in October-2021 for generation of solar power used by the Tenant, we have increased the 'rent for machines' from the month of October-2021. And we have amended existing rental agreement effecting new machines (solar panel) and increase in rental value accordingly.

Can we take the ITC, which was paid on both purchase of Solar Panel Assembly and installation charges? Kindly suggest.

Thanks & Regards: G VENUGOPAL

[KASTURI SETHI]

Madam,

Whether expenses incurred on Solar Panel Assembly been capitalized in the books of accounts ?

[Shilpi Jain]

Credit would be eligible as it is used for providing taxable services and ig is installation of the solar equipment which is a plant and machinery under gst.

[KASTURI SETHI]

The following decision of AAR is in support of the views of Madam Shilpi Jain :-

It will surely help the querist.

2020 (10) TMI 808 - AUTHORITY FOR ADVANCE RULING, TAMILNADU - IN RE : KUMARAN OIL MILL

[Shilpi Jain]

It is generally difficult to find favourable advance rulings and it is great on part of Kasturi sir to have shared one

[Ganeshan Kalyani]

In my view Solar panel will be considered as plant and machinery and therefore the input tax credit is eligible. This is the best part in GST that against an outward supply of service the input tax credit on goods is eligible to be claimed. In erstwhile regime it was not allowed.

[gvenugopal g]

Dear Experts,

Good Morning!

Thank you very much for your valuable replies and brief explanations.

Please note that the expenses (cost of machinery and installation charges as per a single Tax Invoice raised by the Vendor) incurred on Solar Panel Assembly has been capitalized in the books of Accounts.

Thanks & Regards: G VENUGOPAL

[Shilpi Jain]

Once plant and machinery does not matter whether it is capitalised or otherwise, cŕedit would be eligible

[KASTURI SETHI]

Madam gvenugopal g,

Just have a look on this decision of AAR:-

2019 (10) TMI 570 - AUTHORITY FOR ADVANCE RULING, KARNATAKA IN RE : SHRI KESHAV CEMENT AND INFRA LIMITED

[KASTURI SETHI]

It cannot be denied that Solar Power Panel is not an immovable property/asset/apparatus etc.

[Shilpi Jain]

Even if we consider solar plant to be immovable, section 17(5) excludes immovable plant and machinery. So credit eligible.

AI Summary

Input tax credit on solar panels is claimable when panels qualify as plant and machinery used for taxable services. ITC on procurement and installation of solar panels is claimable where the panels constitute plant and machinery used in providing taxable services; capitalization in the books does not affect eligibility. The immovable property exclusion does not bar credit for plant and machinery, so a solar installation used for taxable supplies remains eligible for input tax credit.