The Kerala AAR, In the matter of Grand Centre Mall, [Advance Ruling No. KER/15/2025 dated May 19, 2025], held that Input Tax Credit (ITC) is available on the rooftop solar power plant installed at the mall, when it is used exclusively for the provision of taxable services, as it qualifies both as ‘plant and machinery’ and ‘capital goods’.
Facts:
Grand Centre Mall (“the Applicant”) is a partnership firm engaged in providing services such as renting of immovable property and common area maintenance (CAM) at its shopping mall. The outward supplies, which include air conditioning, CCTV surveillance, security, lighting, lift and escalator maintenance, are fully taxable, and invoiced under SAC codes 997212, 998599, and 998366.
The Applicant had installed a 500-kW rooftop solar power plant on the rooftop and parking area of the mall. The entire electricity generated is used exclusively for operating the common facilities of the mall, such as lighting, air-conditioning, CCTV, networking, UPS systems, lifts and escalators, etc. The cost of these services, including solar-generated electricity, is recovered through monthly CAM invoices raised to licensees.
The Applicant contended that the solar plant qualifies as ‘plant and machinery’ as per Explanation to Section 17(6) of the CGST Act, since it is fixed to earth using structural supports but does not fall within the exclusions (i.e., land, building, civil structures).
Issue:
Whether the Applicant is eligible to claim ITC as input, input service or capital goods on the procurement and installation of a rooftop solar power plant under Sections 16 and 17 of the CGST Act, 2017?
Held:
The Kerala AAR, in Advance Ruling No. KER/15/2025 held as under:
- Observed that, the electricity generated from the solar power plant is used exclusively for consumption for common facilities such as lighting, air conditioning, surveillance, network infrastructure, UPS systems, lifts and escalators, which are essential and form an integral part of the taxable CAM services provided by the Applicant.
- Held that, the solar power plant is used in the course or furtherance of business and therefore meets the eligibility criteria under Section 16(1) of the CGST Act, and that the solar plant qualifies as ‘capital goods’ as per Section 2(19), since its value is capitalised and it is used for business purposes.
- Further held that, since the solar panels are mounted without major civil structures and can be dismantled without significant damage or effort, the installation does not qualify as ‘immovable property’. Hence, the restrictions under Section 17(5)(c) and 17(5)(d) do not apply.
- Held that, the mode of installation, being fixed to rooftop and parking structures by screws and anchors, satisfies the legal test of being fixed to earth by foundation or structural support. Thus, the plant qualifies as ‘plant and machinery’ under Explanation to Section 17(6).
- Further held that, since each licensee has a separate electricity connection and pays their own bills, and the solar-generated electricity is used solely for internal CAM services, the solar plant is not used for any exempt supply of Electrical energy under Notification No.2/2017- Central Tax (Rate) dated June 28, 2017 under HSN 2716. Therefore, the provisions of Section 17(2), requiring proportionate reversal of ITC on account of exempt supplies, are not attracted in this case.
- Held that, the Applicant is eligible to avail full ITC on the rooftop solar power plant in terms of Sections 16 and 17 of the CGST Act, 2017.
Our Comments:
The Gujarat Authority for Advance Ruling, in the case of M/s Unique Welding Products Pvt. Ltd.,[GUJ/GAAR/R/2025/01 order dated January 15, 2024] held that ITC on rooftop solar power systems is admissible where such systems are not permanently embedded in the earth and are used for captive power generation in the course of manufacturing taxable goods. The AAR reasoned that such rooftop plants, being bolted and fixed for operational stability, qualify as plant and machinery under the Explanation to Section 17 of the CGST Act and do not fall within the ambit of blocked credits under Section 17(5)(d).
Similarly, the Tamil Nadu Authority for Advance Ruling, in the case of M/s. KLF Nirmal Industries Pvt. Ltd.,[Order No. 19/ARA/2021, Order dated June 18, 2021] held that the applicant was entitled to input tax credit on goods and input services used for the design, engineering, supply, and erection of a 265 kW rooftop solar power plant. The AAR reasoned that since the electricity generated was used exclusively for captive consumption in the manufacture of taxable goods, and met the statutory conditions of Sections 16 and 17 of the CGST Act, the credit could not be denied.
These authorities collectively support the view that rooftop solar plants used in furtherance of taxable business activity can be classified as plant and machinery and therefore do not attract the ITC restrictions in Section 17(5)(d).
Relevant Provisions:
Section 16 – CGST Act, 2017
Eligibility and conditions for taking input tax credit:
“(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.”
Section 17 of the CGST Act, 2017
Apportionment of credit and blocked credits:
“(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:-
(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.”
(6) The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed.
Explanation.- For the purposes of this Chapter and Chapter VI, the expression “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-
land, building or any other civil structures;
telecommunication towers; and
pipelines laid outside the factory premises.”
CLICK HERE FOR OFFICIAL JUDGMENT COPY
(Author can be reached at info@a2ztaxcorp.com)
DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.
