Order date: 31-8-2022

Facts: 

• The applicant namely, VBC ASSOCIATES, engaged in the business of maintenance of an immovable property at Chennai has procured, erected and commissioned Solar Power Panels for generation of electricity at their additional place of business at Tamil Nadu.
• The applicant has submitted that as per Section 17(5) (c) and (d) of the CGST Act 2017, the input tax credit is not available for works contract services received for the construction of the immovable property and goods and services received for construction of immovable property on own account.
• The property is also the principal place of business of the applicant, as the said maintenance services for the immovable property are being provided from that premises. They stated that they provide immovable property maintenance services under the main SAC 9972. The petitioner, on monthly basis, raises an invoice for 'EB and DG Charges' to the tenants, and duly deposits the same with the petitioner Government at the rate of 18% per month under SAC 997221.
• The petitioner stated that there would be no sale of the units of electricity generated from the solar panels and the units thus generated would be used against the cost of electricity for the leased premises, on which tax is being collected from the tenants on the full price of the service. To get such credit in respect of solar power panels, the applicant, as mentioned above, has borne the cost of procurement of solar panels and installation and commissioning of solar power panels.

Issue:

• 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.

Order:

• The authority observed that applicant has paid for the net units consumed after deducting energy units generated by Solar Power Plant. However, the applicant has recovered amount through separate invoice, for the gross energy units consumed by the tenants in the building at the rate charged by TNEB, which implies that the energy generated by Solar Power Plant are sold by the applicant to the tenants on their own account.
• Electrical Energy is goods classified under HSN 2706 and exempted by Notification No.02/2017 CT(R) dated 28.06.2017 vide SI. No. 104. Therefore, electrical energy generated by Solar Panel installed by the applicant is exempted goods supplied to tenants and consequently input tax paid on the Solar Panels are ineligible as credit of input tax on Capital Goods used exclusively for supply of exempted supply are not eligible under Section 17(2) read with Rule 43(a).
• Thus, the applicant is not eligible for a claim of Input Tax Credit, as per Section 17(2) of the CGST /TNGST Act read with Rule 43(a) of CGST /TNGST Rules 2017, on the Goods/Services used in the installation of Solar Power Panels, which are considered as Plant and Machinery.