2023 (12) TMI 105 - AAAR - GST

Scope of Advance Ruling application - Input Tax Credit - solar power panels procured and installed - blocked credit under Section 17(5) (c) and (d) of CGST/ TNGST Act, 2017. The main ground of appeal is that the AAR had exceeded its jurisdiction in delivering a ruling on apportionment of credit in terms of Section 17(2) of the CGST Act, 2017, rather than delivering a ruling on the question of blocked credit. HELD THAT - As the Appellants are not supplying works contract service for construction of an immovable property and since such their activity does not fall within the ambit of the Section 17(5)(c) or (d) of CGST Act, 2017, the question whether ITC is blocked or otherwise, in terms of the said provisions, does not arise at all and the issue raised before the AAR was totally irrelevant. Moreover, the issue raised is extraneous to provide a ruling, as it is not within the scope of Section 97(2)(d) of the Act i.e. admissibility of input tax credit. Moreover, the provisions of the Section 17(2) of the Act, read with the Rule 43(1) (a) of the CGST/TNGST Rules, 2017 (hereinafter referred to Rules) disentitles the ITC in this case on the Solar Power Panels used for installation of the Solar Power Plant which were used by the Appellant for supply of Electric Energy which is exempted from the whole of the GST payable under the Notification No 2/20217 CT(R) dated 28.06.2017 (Sl.No 104). When Electricity energy manufactured using the Solar Panels were supplied to TANGEDCO which involves no payment of GST, the supply chain get snapped at the point and the inputs or capital goods used for such supply would not be eligible for any input tax credit. The further purchase of electricity from TANGEDCO at a different location is altogether a different supply and the fact that the billing is done by TANGEDCO in a consolidated matter does not alter the position. - the tax paid on the inputs i.e. Solar Panels are not eligible for input tax credit as the same are used exclusively for supply of exempted goods in view of the provisions of Section 17(2) of the CGST Act, 2017 read with Rule 43(1)(a) of the CGST Rules, 2017.

Summary

Issues Involved:

1. Eligibility of Input Tax Credit (ITC) on solar power panels under Section 17(5)(c) and (d) of CGST/TNGST Act, 2017.
2. Jurisdiction of the Authority for Advance Ruling (AAR) in delivering a ruling on apportionment of credit under Section 17(2) of CGST Act, 2017.

Summary:

Issue 1: Eligibility of Input Tax Credit on Solar Power Panels

The Appellant, a partnership firm engaged in the maintenance of immovable property, sought clarification on whether the input tax credit on solar power panels procured and installed is blocked credit under Section 17(5)(c) and (d) of CGST/TNGST Act, 2017. The Original Authority ruled that the Appellant is not eligible for ITC on goods/services used in the installation of solar power panels, which are considered as plant and machinery, as per Section 17(2) of the CGST/TNGST Act read with Rule 43(a) of CGST/TNGST Rules 2017.

Issue 2: Jurisdiction of AAR in Delivering a Ruling on Apportionment of Credit

The Appellant contended that the AAR exceeded its jurisdiction by delivering a ruling on the apportionment of credit under Section 17(2) of the CGST Act rather than addressing the specific question of blocked credit under Section 17(5). The Appellate Authority noted that the question raised before the AAR was about the admissibility of ITC, which falls under Section 97(2)(d) of the Act. However, the AAR examined the issue in totality and ruled that the ITC is not admissible ab initio under Section 17(2) of the Act, as the solar power panels are used for generating electricity, an exempt supply.

Findings and Conclusion:

The Appellate Authority upheld the AAR's decision, emphasizing that the ITC on solar power panels is not admissible under Section 17(2) of the Act, as the electricity generated is an exempt supply. The Authority also clarified that the provisions of Section 17(5)(c) and (d) are not relevant to the case, as the Appellant is not involved in the construction of immovable property. The Appellant's arguments regarding the separation of the partnership firm and property owners under civil law were dismissed, as the GST law treats them as separate legal entities.

Ruling:

The Appellate Authority upheld the decision of the Authority for Advance Ruling of Tamil Nadu, vide AAR Order No. 33/AAR/2022 dated 31.08.2022, and rejected the appeal.