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 machinery may support taxable cement production, subject to proportionate reversal for exempt electricity supplies.
Input tax credit on solar power plant machinery is discussed as eligible where generated electricity is captively used in manufacturing taxable cement in the course or furtherance of business. A separate location for the plant is not treated as determinative where the activities are under the same GST registration. Electricity supplied externally is an exempt supply, and ITC attributable to that supply requires proportionate reversal. Recording the plant as an additional place of business is suggested as a compliance precaution.