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TMI Blog2025 (3) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the business of the applicant, the generation and supply of electricity is treated as a 'supply' as per the GST provisions. Whether, it is taxable supply of goods or services or not. As per the tariff, electricity is goods classifiable under HSN 27160000 as specified under First Schedule to the tariff. Electricity is charged to 'NIL' rate of tax in terms of Sl. No. 104 of N/N. 02/2017-CT(Rate) dated 28-06-2017? - HELD THAT:- As per the definition of Exempt supply, 'supply of any goods or services or both is attracting nil rate of tax. Hence, as per the said definition, the generation and supply of electricity to TANGEDCO which attracts nil rate of tax is an exempted supply and accordingly, all provisions related to exempt supply are applicable. Eligibility of input tax Credit (ITC) on goods and services used or consumed during the setting up for Solar Power Plant - HELD THAT:- In the instant case, as the activity of generation of electricity itself is 'supply of goods' the tax paid on goods and services used and consumed in the setting up of Solar Power Plant is eligible to be taken as ITC. The applicant has stated in the statement of facts that the cost incurred for insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AKRISHNA S, AND SHRI. B. SUSEEL KUMAR, MEMBER 1. Any appeal against this Advance Ruling order shall lie before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai as under Sub-Section (1) of Section 100 of CGST Act / TNGST Act 2017, within 30 days from the date on the ruling sought to be appealed is communicated. 2. In terms of Section 103(1) of the Act, Advance Ruling pronounced by the Authority under Chapter XVII of the Act shall be binding only- (a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advance ruling. (b) on the concerned officer or the jurisdictional officer in respect of the applicant. 3. In terms of Section 103(2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. 4. Advance Ruling obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. At the outset, we would like to make it clear that the provisions of both the Central Goods and Services Tax Act and the Tamil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e actual energy consumed in the factory. Accordingly electricity bill shall be generated by TANGEDCO, wherein the actual consumption of electricity in factory shall be stated and it shall be reduced by the electricity produced by Solar Power Plant installed by the applicant. Further, there is no banking agreement with TNEB to store the surplus or deficit, if any. (vi) The applicant files an application before the Authority to understand whether they are eligible to avail input tax credit as inputs/capital goods or input services of the items used in Design, Engineering, Installation of 10.2 MW of the Solar Power Plant as per MNRE & IEC Standards wherein the generation of electricity from such solar plant is used for captive consumption. (vii) And whether the applicant is eligible to take input tax credit for inputs and services for running the solar plant. 4. With the above facts of the case the applicant has filed an application seeking for advance ruling on the following queries- Query 1 - Whether the applicant is eligible to take input tax credits as inputs/capital goods or input services of the items used in Design, engineering, Installation of 10.2 MW of the Solar Power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2 (17) of the CGST/TNGST Act, 2017, Business inter alia includes any trade, commerce, manufacture, profession, vocation etc, whether or not undertaken for a monetary benefit. Thus, the activity of the applicant namely manufacture of steel constitute business in terms of the said definition. * As per Section 2 (19) of the CGST/TNGST Act, 2017, Capital goods means goods, the value of which is capitalized in the books of accounts of the person claiming the input tax credit and which are used or intended to be used in the course of furtherance of business. Thus, the Solar Power Plant shall be classified as a capital asset in terms of Section 2 (19) of the CGST/TNGST Act, 2017. * Further the primary condition for availing ITC is stated under Section 16 (1) of the Act, where the taxpayer is entitled to credit of input tax charged on any supply of goods and or services made to them in furtherance of business subject to the conditions and restrictions as specified in Section 16(2) and Section 17 of the Act. * Quoting Section 17 (5) (c) and Section 17 (5)(d) of the Act, the applicant stated that Solar Power Plant is an equipment/machinery fixed to earth by foundation and are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices relating to purchase/import of materials used for installation and commissioning of Solar Power Plant. AR informed that the wheeling contract/agreement with TANGEDCO will be furnished soon. Comments offered by the Central Executive Commissionerate, Chennai North. 7.1 Quoting Section 17 (5) (c) and (d) of the Act, they have stated that the Solar Power Plant to be installed is a large scale power plant for the reason that the capacity is more than 1 MW. As per the agreement with TANGEDCO for usage of energy generated from Solar Power Plant, it may be installed as an inherent element of permanency, since the power plant cannot be shifted and relocated at frequent intervals. Hence opined that the Solar Power Plant cannot be a movable property. 7.2 Clauses (c) and (d) of Section 17 (5) provides for blocking of credit on works contract and on goods or services received by a taxable person for construction of an immovable property (other than plant & machinery). They have not accepted the fact furnished by the applicant that Solar Power Plant is an equipment/machinery directly used for making outward supply of steel, since even prior to installation of Solar Power Plant, the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17 of the CGST/TNGST Act, 2017 for claiming eligible ITC on the goods and services received for installation and running of Solar Power Plant. 12. The applicant is engaged in the primary business of manufacture and supply of different grades and types of steel falling under Chapter heading 72165000, 72111410, 72141090 etc., which are taxable at the rate of 18%. They have their manufacturing unit at Gummidipoondi, Tiruvallur District. They have their windmill installed at Kayathar Taluk, Tuticorin District which generates electricity of 10.2 MW. They are planning to replace the same with Solar Power Plant which also generates same 10,2 MW. Intimation to the Chief Engineer, TANGEDCO was also submitted by the applicant for the replacement of wind mill power plant with Solar Power Plant. During the personal hearing, the applicant has stated that the place where the activity of generation of electricity proposed to be done was included as 'Additional place of business' in their GST registration. 13. Section 2 (17) of the CGST/TNGST Act, 2017 defines business as "Business includes- (a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ANGEDCO to store the surplus or deficit, if any. In the absence of banking agreement with TANGEDCO, any surplus/excess power generated shall get lapsed. Here, the power generated shall not be construed as captively consumed as the power is generated elsewhere, though by the same person and supplied to another person, namely TANGEDCO. As the activity of supply of electricity generated to a different entity is involved and the same is adjusted against their electricity charges at the factory of production and supply, the electricity generated shall not be construed as 'captively consumed' becomes part of the business activity of the applicant. As the Solar Power Plant forms part of the business of the applicant, the generation and supply of electricity is treated as a 'supply' as per the GST provisions. 17. Once the power generated and transferred to TANGEDCO by the applicant is treated as supply, the next question to be answered is whether, it is taxable supply of goods or services or not. As per the tariff, electricity is goods classifiable under HSN 27160000 as specified under First Schedule to the tariff. Electricity is charged to 'NIL' rate of tax in terms of Sl. No. 104 of Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds'. Since, the applicant himself has stated that the cost of installing and commissioning of Solar Power Plant is capitalized in their books, all goods and services used in setting up for Solar Power Plant are classified as Capital Goods. 23. In terms of clause (d) of Section 17 (5) of the CGST/TNGST Act, 2017, ITC is not eligible on the goods or services received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in the course of furtherance of business. Here it is to be ascertained whether the Solar Power Plant is an immovable property fixed to earth and falls under exclusion clause of Section 17 (5) or not. Or, whether it falls within the definition of 'plant & machinery' as per explanation to Section 17 (5) for claiming ITC under Section 16 (1) of the Act. 24. As per the Explanation to Section 17 (5), the plant & machinery is defined as "plant and Machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing. 28. As per the above, it is clear that the provisions of Rule 43 will come into play when a taxpayer uses the same goods and services for effecting both exempted and taxable supplies. Rule 43 of the CGST/TNGST Rules, 2017 prescribes procedure for determining the amount of eligible ITC and reversal in respect of capital goods. Rule 43 of CGST/TNGST Rules, 2017 prescribes, Rule 43. Manner of determination of input tax-credit in respect of capital goods and reversal thereof in certain cases. - (1) Subject to the provisions of sub-section (3) of Section 16, the input tax credit in respect of capital goods, which attract the provisions of sub-section (1) and (2) of Section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies, shall be attributed to the purpose of business or for effecting taxable supplies in the following manner, namely,- (a) the amount of input tax in respect of capital goods used or intended to be used exclusively for non-business purposes or used or intended to be used exclusively for effecting exempt supplies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is captively consumed. Hence, the facts of the case shall not be related to the instant case. (iii) AAR, Karnataka - M/s. Shri Keshav Cements and Infra Limited - Order No. KAR ADRG 26/2019 dated 12th Sep, 2019 This decision of the advance ruling authorities was restricted to capitalization of some of the specific goods listed by the applicant and not the entire power plant which is not the case here. The goods falling under the definition of 'plant & machinery' alone are eligible for ITC. (iv) AAR, Tamilnadu - M/s. Kumaran Oil Mill Order No. 33/AAR/2020 dated 28-09-2020 In the above ruling, the electricity is treated as exempt supply and proportionate ITC was allowed to be availed. All the rulings cited by the applicant were distinguished from the facts of the present case. 30. Hence, on the facts stated by the applicant and circumstances enumerated above and in line with the provisions of statutes governing the input tax credit, we intend to take the queries one by one for a decision. QUERY-1. "(i) Whether the applicant is eligible to take input tax credits as inputs/capital goods or input services of the items used in Design, Engineering, installation of 10.2 MW So ..... X X X X Extracts X X X X X X X X Extracts X X X X
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