ITC on power plant

[KARAN VERMA]

Sir, assessee is manufacuring aluminium which is taxable under GST and also generate power through power plant. 70 % power generated used in manufacturing of aluminium and 30 % is sold outside to state Govt. Now, electricity is exempt under GST.

GST officer asked to reverse whole ITC in relation to power plant whether capital, input or services. But my contention is we are eligible for proportionate ITC on power plant to the extent of power used in manufacturing of aluminium product.

Whether I m eligible for proportionate ITC on power plant. Kindly provide any judgement copy.

AI Summary

Input tax credit apportionment: restrict ITC for exempt power supplies, allocate reversal by turnover-based method.
Input Tax Credit must be restricted where inputs are used partly for taxable supplies and partly for exempt supplies; the credit attributable to exempt supplies must be reversed with interest. In the stated fact pattern, power used for manufacturing is taxable while power sold outside is exempt, so the ITC portion attributable to the exempt sale must be disallowed. Allocation practice and AAR precedents support calculating reversal in proportion to exempt supplies, commonly by a turnover-based mechanism rather than solely by physical usage.