Eligibility of ITC on Plant and Machinery of a Solar Power Plant Used for Captive Consumption in a Cement Manufacturing Unit

[TEAM GST]

Whether Input Tax Credit (ITC) on the Plant and Machinery of a Solar Power Plant installed for captive consumption in a cement manufacturing unit is admissible under the CGST Act, 2017, in the following circumstances:

a. The majority of the electricity generated by the solar power plant is captively consumed in the manufacture of cement, which is a taxable outward supply.

b. A small portion of the electricity generated is supplied to an external agency. Since the supply of electricity is an exempt supply under GST, proportionately ITC attributable to such exempt supply is reversed in accordance with Rule 43 of the CGST Rules, 2017.

AI Summary

Input tax credit on captive solar plant machinery raises proportionate reversal issues where electricity is partly externally supplied. Input tax credit on plant and machinery of a solar power plant used predominantly for captive generation of electricity in cement manufacturing is considered under the CGST Act, 2017. Cement constitutes a taxable outward supply. Where a limited portion of generated electricity is supplied externally and treated as an exempt supply, the related input tax credit is proposed to be reversed proportionately under Rule 43 of the CGST Rules, 2017.