The Authority for Advance Rulings (AAR), Gujarat in the case of M/S. UNIQUE WELDING PRODUCTS P. LTD.,vide Order No. No.- GUJ/GAAR/R/2024/01 dated 05.01.2024, addresses the GST issues relating to Roof-top solar system installed on the roofs for generating power. Nowadays, installation of these type of Solar Systems has become a need for an hour in order to save natural resources. The AAR provides that the Roof solar plant are affixed on the root of the building is not embedded to earth, and constitutes as movable property. Further,  roof top solar system with installation and commissioning constitute plant and machinery of the applicant and hence is not blocked ITC under section 17(5) of the CGST/GGST Act.

In this case, the applicant is engaged in the business of manufacturing and sale of welding wires. The applicant has entered into an interconnection agreement with power distribution licensee (Madhya Gujarat Vij Company Ltd) for captive use of power generated by Roof Top Solar System and have recently installed a roof top solar system on the factory roof for power generation. It was stated that the generated power is solely and captively used for manufacturing welding wires within the same premises.

Issue raised:-

i) Whether the rooftop solar system with installation and commissioning constitute plant and machinery of the applicant which are used in the business of manufacturing welding wires and hence not blocked input tax credit under section 17(5) of the CGST/GGST/ IGST Act.

ii) Whether ITC on inputs, input services, and capital goods used in the installation of the roof-top solar power plant.

Submission of the Applicant:-

The Applicant submitted that the solar rooftop plant is bolted to the factory roof by means of screws and bolts for operational efficiency and safety. Further, the roof top solar plant can be dismantled and sold, if required. Therefore, the roof top solar plant is not permanently fastened to the building and is an movable property.

Also, the rooftop solar plant qualifies as plant and machinery that will be used for furtherance of business of supplying taxable goods. Hence, it is not covered under blocked credit as mentioned in 17(5)(d) of the CGST Act, 2017.

AAR's Ruling:-

The AAR, Gujarat observed the interconnection agreement between the applicant Madhya Gujarat Vij Company Ltd and the Photographs of the roof-top solar plant, highlighting the installation on the factory roof. It was stated that the roof solar plant, affixed on the root of the building is not embedded to earth. Accordingly it is not an immovable property but a plant and machinery, which is utilized to generate electricity which is further solely and captively used in the manufacture of welding wires. Also, going through the balance sheet of the applicant, it is evident that they have capitalized the roof solar plant in their books of accounts.

Thus, the roof-top solar system, with installation and commissioning qualifies as plant and machinery for the applicant, making it eligible for ITC under section 17(5) of the CGST/GGST Act.