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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 ..... tion 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 Nadu Goods and Services Tax Act (herein after referred to as 'Act') are in pari materia and have the same provisions in like matters and differ from each other only on few specific provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act, 2017 would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act, 2017. 2. M/s Kanishk steel Industries Limited (hereinafter 'the Applicant') submitted a copy of challan CPIN HDFC24023300566235 dated 29-02-2024 evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017 (hereinafter referred to as Rules). The online application form for advance ruling dated 01-03-2024 was physically received on 11-03-2024 as mandated under Rule 107A. 3. The applicant has narrated the Statement of relevant facts as follows: (i) M/s Kanishk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 plant as per MNRE & IEC standards wherein the generation of electricity from such solar plant is used for captive consumption. Query 2 - Whether the applicant is eligible to take input Tax credit for inputs and services for running the solar plant. 5. Interpretation of law by the Applicant on the questions raised by them. * The Applicant is engaged in the business of manufacture of different types of steel for decades which are covered under HSN 72165000, 72141000 etc taxable @18%). * The Applicant has now planned to replace its existing 10.2 MW Windmill power plant with Solar Power plant of 10.2 MW which is to be installed at Ayyanaruthu Village Kayathar Taluk, Tuticorin District at 33Kv level in Ayyanaruthu 110/33/11 SS. The said land was already owned by the applicant and it was previously used for wind mill energy generation. * The applicant has also intimated to the Chief Engineer of TANGEDCO for the replacement of Wind Mill Power Plant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 directly used for making taxable supply of steel. Accordingly, the Solar Power Plant does not fall under the category of Immovable property. * By the explanation to Section 17, to avail credit on capital goods, cost must to capitalized in books of accounts without considering the GST and further it should not be an immovable property as explained in Section 17 (5) of the Act. Therefore, in the instant case, Solar Power Plant that has been planned to be installed is capitalizes in books of accounts under the category Plant & Machinery' in fixed assets register. * The applicant contends that ITC on installation of Solar Power Plant, being a plant and machinery and maintenance of such solar power plant from which electricity is generated and consumed fully for captive consumption is an eligible ITC as it fulfills the conditions of Section 16 and it is not a blocked credit under Section 17 (5) (d) of CGST/TNGST Act, 2017. * The applicant has relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery). 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 applicant was effecting taxable outward supply of steel. Hence, the goods and services received by the applicant for construction of the plant i.e an immovable property (other than plant & machinery) is a blocked credit under Section 17 (5) of the Act and the applicant is not eligible to take the input tax credit. 7.3 The electrical energy to be generated by Solar Power Plant installed by the applicant is classified under HSN 27160000 and exempted vide Notification No. 02/2017-CT(Rate) dated 28-06-2017. Hence, ITC on inputs and services for running the plant used exclusively for supply of exempted goods i.e., electrical energy is an ineligible credit under Section 17 (2) read with Rule 43(a) of the CGST Rules, 2017. 7.4 It was further stated that there are no pending proceedings on the issues raised in the Advance Ruling application. 8. No comments were offered by the State authorities and hence it is construed that no proceedings are pending on the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 similar activity, whether or not it is for a pecuniary benefit; (b) Any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) Any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) Supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) Provision by a club...................to its members; (f) Admission, for a consideration, of person to any premises; (g) Services supplied by a person...................Profession or vocation; (h) Activities of a race club..................book maker in such clib; and (i) Any activity or transaction undertaken by Central Government, .................as public authorities." 14. As per the above definition of Business', the activity of the applicant falls within the scope of business activity and the gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Notification No. 02/2017-CT(Rate) dated 28-06-2017. 18. "Exempt supply" is defined under Section 2 (47) as "exempt supply" means supply of goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under Section 11, or under Section 6 of the Integrated Goods and Services tax Act, and includes non-taxable supply; 19. As per the above definition '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. 20. Now coming to the question of eligibility of input tax Credit (ITC) on goods and services used or consumed during the setting up for Solar Power Plant, the eligibility of ITC is governed by Section 16 of the CGST/TNGST Act, 2017 with conditions. 21. As per Section 16(1), "(1) Every registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 structural supports but excludes- (i) land, building or any other civil structure; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises 25. The Solar Power Plant is a Capital goods since capitalized in the book of accounts under the category of plant and machinery as a fixed asset which is used for making outward supply of goods (electricity). Since this capital goods is used in the generation of electricity chargeable to nil rate of tax, the same can be classified as 'Plant & Machinery' though an immovable property fixed to earth. 26. In terms of Section 16 (3), when the registered person who is claiming depreciation on the tax component of the cost of capital goods and plant & machinery under the provisions of Income Tax Act, 1961, ITC on said tax component shall not be allowed. Here the applicant has not disclosed whether they are claiming/going to claim any depreciation on the tax component of cost of capital goods an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall be indicated in FORM GSTR-2 (and FORM GSTR 3B) and shall not be credited to his electronic credit ledger; (b) the amount of input tax in respect of capital goods used or intended to be used exclusively for effecting supplies other than exempted supplies........... 29. From the above as per clause (a) of sub-rule (1) of Rule 43, the ITC of capital goods used exclusively for providing exempt supply shall not be available for availment and utilization. The applicant, being a taxable person engaged in effecting taxable (manufacture & supply of Steels) and exempted (generation and supply of electricity) supplies, falls under Section 17 (2) and 17 (3) of the CGST/TNGST Act, 2017, have to follow the procedure prescribed under Rule 43 for determining the eligible ITC and reversal thereof in respect of capital goods used for exclusive exempt supply on monthly basis in their mandatory returns during filing and payment. Accordingly, the applicant is not el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Solar Power Plant as per MNRE & IEC Standards wherein the generation of electricity from such solar plant is used for captive consumption. The applicant is not eligible for input tax credit on the goods and services exclusively used for the provision of exempt supply namely 'generation and supply of electricity'. Electricity, being a goods charged to Nil rate of tax, is supplied to TANGEDCO which in turn is given as Credit for adjustment towards the power consumed in the factory of manufacture and hence electricity is not captively consumed but the 'supply is to be treated as 'exempt supply'. As per Section 17 (2) and 17 (3) of the CGST/TNGST Act, 2017 read with Rule 43 (1) (a) of the CGST/SGST Rules, 2017, the input tax credit exclusively used or consumed for the generation and supply of electricity which is an exempted supply is unavailable for availment as input tax credit. QUERY-2. (ii) Whether the applicant is eligible to take input tax credit fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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