ITC ON SOLAR PLANT - GST CENTRAL AUDIT TEAM WANT TO REVERSED AND CHARGE INTEREST

[RAVI MUNDRA]

We installed a solar power system at our manufacturing plant in the 2020-21 financial year. During a recent GST audit, the department has raised an objection and is demanding a reversal of Input Tax Credit (ITC) claimed on this solar installation. What potential grounds might the GST department be citing for this ITC reversal, and what would be the best course of action/solution to defend our ITC claim or minimize any potential liability?

 

AI Summary

Input tax credit on solar installations: classification as plant and machinery determines GST eligibility and audit defence.
ITC on a solar generating system is contested as construction of immovable property; the defence rests on the statutory explanation that equipment affixed by foundation used in business qualifies as plant and machinery. The assessee must show capitalization as plant and machinery, provide invoices, asset registers, CA certifications, technical specifications demonstrating modularity and detachability, and operational data proving captive consumption for taxable manufacturing. Reliance on persuasive AAR and judicial decisions and a detailed legal reply to any show cause notice are recommended, with appeals and challenges to interest or penalty to follow if necessary.