TaxTMI 
TaxTMI 
ITC ON SOLAR PLANT - GST CENTRAL AUDIT TEAM WANT TO REVERSED AND CHARGE INTEREST
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....TC ON SOLAR PLANT - GST CENTRAL AUDIT TEAM WANT TO REVERSED AND CHARGE INTEREST <br> Query (Issue) Started By: - RAVI MUNDRA Dated:- 11-7-2025 Goods and Services Tax - GST <br> Got 6 Replies <br> GST<br> <br> 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 In....
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....put 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? --Reply By: YAGAY andSUN The Reply: The objection raised by the GST Department in respect of Input Tax Credit (ITC) claimed on the solar p....
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....ower system installed at the manufacturing premises in FY 2020-21 is likely premised on the restrictive provisions of Section 17(5)(d) of the CGST Act, 2017. This clause disallows ITC on goods or services used for construction of immovable property (other than plant and machinery) on one's own account. The department may contend that the solar installation constitutes immovable property, thereby a....
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....ttracting the ITC restriction. However, the statutory explanation to Section 17 clarifies that "plant and machinery" includes equipment and apparatus affixed to the earth by foundation or structural support, used in business operations. Solar generating systems, when used for captive power to support taxable manufacturing activity, fall within this definition. Judicial rulings, including Solex Ene....
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....rgy Ltd. v. State of Gujarat, have recognized such installations as eligible plant and machinery, not civil structures. The mere attachment of the system to land or rooftops does not, by itself, render the asset immovable if it retains separability and serves a functional business use. To defend the ITC claim, the assessee must substantiate that the solar system is capitalized as plant and machine....
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....ry, not as part of building or civil works. Supporting evidence such as vendor invoices, CA certifications (non-claim of depreciation on tax component), asset registers, and consumption data linking power generation to manufacturing must be furnished. Technical specifications showing modularity and detachability of the system can reinforce the argument. If a show cause notice is issued, a detailed....
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.... legal response citing the Explanation to Section 17 and relevant case law should be submitted. In case of an adverse order, the matter may be appealed under Section 107. If reversal is made under protest, interest and penalty may be challenged under Section 73 by demonstrating absence of wilful default or suppression. Conclusively, if the solar installation is used in the course of business and q....
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....ualifies as plant and machinery, the ITC should be legally admissible. Proper classification, documentation, and a reasoned legal reply will be key to defending the claim. --- Sub-Reply By: RAVI MUNDRA The Sub-Reply: Dear Sir, Thanks for your Reply. But as per yesterdays discussion with GSt Department, the are disallowing on the basis of Electricity Supply Exempt from GST; ITC Claim on So....
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....lar Power Denied by AAR Tamil Nadu Authority for Advance Ruling (AAR) recently ruled on the input tax credit (ITC) eligibility of Kanishk Steel Industries Limited regarding their solar power plant. The company, engaged in steel manufacturing, sought clarification on whether ITC could be availed on goods and services used for the design, installation, and maintenance of a 10.2 MW solar power plant.....
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.... The plant was intended for captive consumption, with generated electricity transferred to TANGEDCO, which would provide credits against the company? Request you to Please guide --Reply By: KASTURI SETHI The Reply: Dear Querist, In order to contest the objection of the Audit, read the following decisions of AARs word for word. Although the decision of AAR/AAAAR has not precedential value....
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.... yet it has persuasive value. Each case has different facts and circumstances. You can extract strong points in your favour from these decisions. 2020 (10) TMI 808 - AUTHORITY FOR ADVANCE RULING, TAMILNADU - IN RE : KUMARAN OIL MILL --Reply By: KASTURI SETHI The Reply: 2024 (1) TMI 659 - AUTHORITY FOR ADVANCE RULING, GUJARAT - IN RE : UNIQUE WELDING PRODUCTS (P.) LTD. &nb....
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....sp; --Reply By: KASTURI SETHI The Reply: 2023 (10) TMI 473 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT - IN RE : THE VARACHHA CO-OP. BANK LTD. --Reply By: Shilpi Jain The Reply: If the power is capitvely consumed for making a taxable supply finally, then credit should be eligible. <br>***<br> Discussion Forum - Knowledge Sharing....