AAR states rooftop solar systems qualify as plant and machinery, making Input Tax Credit available, incentivizing investments in sustainable energy – EQ
In Short : The Authority for Advance Rulings (AAR) has clarified that Input Tax Credit (ITC) is available on rooftop solar systems, considering them as plant and machinery. This decision is likely to encourage businesses and individuals to invest in rooftop solar installations by providing tax incentives and promoting sustainable energy practices.
In Detail : Gujarat AAR ruled that ITC can be availed on rooftop solar systems with installation and commissioning as solar roof top can be classified under plant and machinery
The Gujarat Authority for Advance Ruling ( AAR ) ruled that ITC ( input tax credit ) can be availed on rooftop solar systems with installation and commissioning as solar roof top can be classified under plant and machinery.
The applicant supplies its products & services after discharging GST @ 18%. The applicant has entered into an interconnection agreement with power distribution licensee ( Madhya Gujarat Vij Company Ltd ) for captive use of power generated by Roof Top Solar System and have recently installed a roof top solar system with a capacity of 440 KW ( AC ) on the factory roof for power generation. The applicant further states that the generated power is solely and captively used for manufacturing welding wires within the same premises.
The applicant has sought advance ruling on whether the applicant is eligible to take ITC as ‘inputs/capital goods’ or `input services’ on the purchased roof top solar system with installation & commissioning in terms of sections 16 & 17 of the CGST/GGST/IGST Act.
The applicant submitted that their business of manufacturing and sale of welding wires from their manufacturing plant in Anand, constitutes ‘business’ as per section 2(17) of the CGST Act, 2017; that in terms of section 16(1) of the CGST Act, they are eligible for the benefit of ITC ( input tax credit ) on any supply of good or services which are used or intended to be used in the course of furtherance of business.
A Two-Member Bench of the Authority comprising Amit Kumar Mishra and Riddhesh Raval observed that “It is therefore, clear that the roof solar plant, affixed on the roof of the building is not embedded to earth. Accordingly it is not an immovable property but a plant and machinery, which is utilized to generate electricity which is further solely and captively used in the manufacture of welding wires. The applicant is engaged in the business of supply of welding wires on payment of GST at the applicable rates.”
The Authority further noted that the applicant has further stated that they have capitalized the roof solar plant in their books of accounts. The Roof Solar Plant, as is evident is not permanently fastened to the building. Thus, it qualifies as a plant and machinery and is not an immovable property, hence, it is not covered under blocked credit as mentioned in 17(5)(d) of the CGST Act, 2017.
“The applicant is eligible to avail ITC on roof top solar system with installation & commissioning under the CGST/GGST Act” the Bench noted.
