In re MBT Traders (Hyper Mart) (GST AAR Karnataka)
Summary: The Karnataka Authority for Advance Ruling considered whether a rooftop solar power generation system installed by MBT Traders (Hyper Mart), a wholesale and retail trader of groceries and general merchandise, qualifies as plant and machinery and whether input tax credit is available on goods, services and capital goods used for its erection, installation and commissioning. The applicant stated that the solar equipment was mounted on its shop rooftop using bolts, screws and structural supports, could be dismantled and relocated, and generated electricity for business operations. It contended that the system was not an immovable civil structure and that credit was not blocked under Section 17(5)(d) of the CGST Act. The applicant relied on the Gujarat AAR ruling in Unique Welding Products Pvt. Ltd. concerning a rooftop solar installation.
The Authority examined the statutory meaning of plant and machinery under the Explanation to Section 17, including equipment fixed to earth by foundations or structural supports and used for making outward supplies. It found that solar panels, inverters, mounting structures and associated components had an independent functional identity and did not become part of the building merely because they were installed on its rooftop. The Authority also examined the applicant’s BESCOM net-metering arrangement, under which surplus electricity could be injected into the grid and adjusted in electricity bills. It held that occasional surplus generation did not change the system’s essential character as equipment used for the applicant’s business, although the claim of exclusive captive consumption was not accurate in every billing period.
The Authority ruled that the rooftop solar system qualifies as plant and machinery and that Section 17(5)(d) does not bar credit merely because the equipment is rooftop-mounted. ITC on inputs, input services and capital goods used in its erection, installation and commissioning is admissible subject to Section 16 and other applicable statutory conditions, including documentary requirements, time limits and depreciation restrictions. It expressly left any separate implications of surplus electricity under Section 17(2) and Rules 42 and 43 for examination based on the net-metering arrangement, and did not decide credit for routine repairs or maintenance.
Cases Discussed
- In re Unique Welding Products Pvt. Ltd., GUJ/GAAR/R/2024/01, dated 5 January 2024 (GST AAR Gujarat) — Relied upon by the applicant in support of ITC eligibility for rooftop solar equipment.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. MBT Traders (Hyper mart) (Herein after referred to as Applicant), Sy No 5/9, Mbt Hypermart, Elelctronic City 2nd Phase, Andapura Anekal Taluk, Bengaluru Urban, Karnataka, 560100, is registered Under GSTIN 29ASAPC4179L1ZH, have filed an application for Advance Ruling under Section 97 Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in form GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act, KGST Act 2017.
2. The Applicant is engaged in the business of wholesale and retail trading of grocery and general merchandise. In the course of its business, the Applicant has installed a rooftop solar power generation system on the premises of its shop building for generation of electricity. The electricity generated through the said solar power system is intended to be consumed captively by the Applicant for its business operations at the same premises.
3. In view of the foregoing facts and circumstances, the Applicant has sought an Advance Ruling on the following questions:
a) Whether the roof top solar system with installation and commissioning constitute plant and machinery which are used in the business of whole and retail sale of grocery and general items?
b) Whether we are eligible for Input Tax Credit on inputs, input services, and capital goods employed in the erection, commissioning, and installation of rooftop solar power system?
4. Admissibility of the Application: The Applicant, under Column 13 of Form ARA-01, has indicated the category of issue as follows:
i. Admissibility of input tax credit of tax paid or deemed to have been paid.
The question raised by the Applicant squarely falls within the ambit of Section 97(2) (d) of the Central Goods and Services Tax Act, 2017, which pertains to admissibility of input tax credit. Accordingly, the present application is held to be admissible under the aforesaid provision.
5. Brief Facts of the Case: – The Applicant submits that the rooftop solar power has been installed on the roof of the shop building using screws and bolts, primalil3Ato ensure operational efficiency and safety. It is further submitted that The said solar power system is capable of being dismantled and relocated, if required. On this basis, the Applicant contends that the rooftop solar power system is not permanently affixed to the building and, therefore, is in the nature of a movable asset.
The Applicant further submits that the rooftop solar power system constitutes “plant and machinery” used in the course or furtherance of its business of supplying taxable goods. Accordingly, the Applicant contends that the said system is not covered by the restriction contained in Section 17(5)(d) of the CGST Act, 2017, which, inter alia, restricts input tax credit in respect of goods or services received for construction of an immovable property, other than plant and machinery. On this basis, the Applicant claims that the input tax credit of GST paid on the procurement and installation of the rooftop solar power system is admissible.
6.1 Applicant’s Interpretation of Law: – The Applicant contends that the rooftop solar power system, though affixed to the roof of the building, is not embedded in the earth and can be dismantled and relocated without causing substantial damage to the building or the system itself. Accordingly, the Applicant submits that the said solar power system does not constitute “immovable property” and is appropriately classifiable as “plant and machinery”.
6.2 The Applicant further submits that the rooftop solar power system is used for the generation of electricity, which is consumed captively within the business premises for carrying out its activities of wholesale and retail trading of grocery and general merchandise. It is, therefore, contended that the said system is directly used in the course or furtherance of business and satisfies the requirement for availment of input tax credit under Section 16 of the CGST Act, 2017.
6.3 The Applicant has also placed reliance on the ruling of the Advance Ruling Authority, Gujarat, in the case of M/s Unique Welding Products Pvt. Ltd., whenever in the issue relating to the eligibility of input tax credit in respect of a rooftop were system installed for generation of electricity was examined. The submits that the facts and circumstances of the said ruling are similar to the present case and, therefore, the ratio thereof supports its contention that the rooftop solar power system constitutes plant and machinery and that the corresponding input tax credit is not hit by the restriction contained in Section 17(5)(d) of the CGST Act, 2017.
7. PERSONAL HEARING PROCEEDINGS HELD ON 20.05.2026:
Shri Chetan R.S, proprietor of M/s MBT traders, appeared for personal hearing held on 20.05.2026 before this Authorities and reiterated the facts and submissions as set out in the application. No additional facts, documents, or further arguments were advanced during the course of the hearing.
FINDINGS 8s DISCUSSION:
8. At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 are pari materia and contain identical provisions on all material aspects, differing only in respect of certain specific provisions. Accordingly, unless a particular reference is made to such dissimilar provisions, any reference to the CGST Act, 2017 shall also be construed as a reference to the corresponding provisions of the KGST Act, 2017.
9. We have considered the submissions made by the applicant in the application for advance ruling. We have also examined the issues on which the advance ruling has been sought, the relevant facts of the case, and the arguments advanced by the applicant, including the submissions made by the proprietor during the course of the personal hearing.
10.1 Since the Applicant has raised questions relating to the classification of the rooftop solar power system as “plant and machinery” and the admissibility of input tax credit in respect of inputs, input services and capital goods used in erection, commissioning, and installation of rooftop solar power system, the issues are examined sequentially.
10.2 We first proceed to examine whether the rooftop solar power system qualifies as “plant and machinery” within the meaning of the CGST Act, 2017 and the KGST Act, 2017.
In this regard, reference is made to the Explanation to Section 17 of the CGST Act, 2017, which defines the expression “plant and machinery” as follows:
“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 structures;
(ii) telecommunication towers; and
(iii) Pipelines laid outside the factory premises.
11.1 Thus, the statutory definition contemplates, inter alia, that the apparatus, equipment or machinery should be fixed to earth by foundation or structural support and should be used for making outward supply of goods or services or both. At the same time, land, building and other civil structures are expressly excluded from the ambit of “plant and machinery”.
Accordingly, for determining whether the rooftop solar power system in the present case constitutes “plant and machinery”, it is necessary to examine thenat ure and manner of its installation, the nature of the attachment to the building/earth, and the purpose for which the system is used, in the light of the statutory definition.
11.2 The Applicant is engaged in the business of wholesale and retail trading of grocery and general merchandise. For the purpose of meeting the electricity requirements of its business premises, the Applicant has installed a rooftop solar power system comprising solar panels, inverter, mounting structures and allied components. The Applicant has submitted that the system is installed on the of top using bolts, screws and structural supports and that the same can be tled and relocated, without forming an integral or permanent part of the
11.3 The first issue that arises for consideration is whether the said rooftop solar power system qualifies as “plant and machinery” within the meaning of the Explanation to Section 17 of the CGST/KGST Act, 2017.
11.4 As mentioned above, the Explanation to Section 17 defines “plant and machinery” to mean 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 other civil structures, telecommunication towers and pipelines laid outside the factory premises.
11.5 A rooftop solar power system is an integrated system consisting of solar panels which convert solar energy into electrical energy, together with inverters, mounting structures and other associated equipment necessary for generation and utilisation of such electricity. The system has an independent functional identity and utility and is capable of being dismantled and relocated. The fact that the system is supported on the rooftop by bolts, screws or other structural supports does not, by itself, result in the system becoming a part of the building or a civil structure.
11.6 The expression “fixed to earth by foundation or structural support” does not necessarily mean that the apparatus or equipment should be permanently embedded in the earth or become incapable of removal. The statutory definition itself recognises structural support as a means by which apparatus, equipment or machinery may be fixed to earth. Therefore, the manner of installation of the rooftop solar system, as stated by the Applicant, does not take the system outside the ambit of plant and machinery.
11.7 It is also relevant to consider the Applicant’s net-metering arrangement with the Bangalore Electricity Supply Company Limited (BESCOM). The electricity negated by the solar power system is used for the requirements of the Applicant’ business premises. Where, during a particular billing period, the electricity generated exceeds the electricity consumed by the Applicant, the surplus electricity is injected into the grid and is settled with BESCOM in terms of the applicable net-metering arrangement.
11.8 The Applicant has furnished a BESCOM bill as an example of such a billing period. The bill records import of 5,073 units and export of 10,160 units, with an amount of 216,278 being credited/payable to the consumer and adjusted against the applicable fixed charges, resulting in a net amount payable by the Applicant of 250,422. Thus, it is evident that surplus electricity may, in certain billing periods, be injected into the grid under the net-metering arrangement.
11.9 In view of the above, the Applicant’s contention that the electricity generated is used exclusively for captive consumption cannot be accepted in an absolute sense. The correct factual position is that the solar power system is installed for meeting the electricity requirements of the Applicant’s business premises and, where generation exceeds consumption in a particular billing period, the surplus electricity is injected into the grid and settled with BESCOM under the net-metering arrangement.
11.10 However, the mere existence of such occasional surplus generation and its injection into the grid does not alter the essential character of the rooftop solar power system. The system continues to be an apparatus/equipment/machinery installed at the Applicant’s business premises for generation of electricity for use in its business. The fact that the system may, in some billing periods, generate electricity in excess of the Applicant’s immediate consumption cannot by itself convert the system into a commercial power-generation plant established principally for making outward supplies of electricity.
11.11 Accordingly, considering the nature of the equipment, its independent functionality, the manner of its installation and its use in connection with the Applicant’s business premises, we hold that the rooftop solar power system, including the solar panels, inverter, mounting/support structures and associated components, qualifies as “plant and machinery” for the purposes of Section 17 of the CGST KGST Act, 2017.
12. Applicability of Section 17(5)(d):-
12.1 Having held that the rooftop solar power system constitutes plant and machinery, it is necessary to examine the applicability of Section 17(5)(d) of the CGST/KGST Act, 2017.
12.2 Section 17(5)(d) restricts ITC in respect of 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 are used in the course or furtherance of business.
12.3 In the present case, the inward supplies in respect of which ITC is sought relate to the erection, installation and commissioning of the rooftop solar power system. As discussed above, the solar power system is held to be plant and machinery and is not itself the land, building or other civil structure on which it is installed.
12.4 Therefore, the restriction contained in Section 17(5)(d) cannot be invoked merely on the ground that the solar power system is installed on the rooftop of the Applicant’s building. The rooftop location or the fact that structural supports are used for installation does not, by itself, bring the impugned inward supplies within the restriction under Section 17(5)(d).
13. Eligibility under Section 16 of CGST Act, 2017:-
13.1 The above finding, however, does not by itself confer an unconditional right to ITC. The eligibility of the Applicant to avail ITC is required to be examined with reference to Section 16 of the CGST/KGST Act, 2017 and other applicable provisions of the Act and the Rules made thereunder.
13.2 Section 16(1) provides that a registered person is entitled, subject to conditions and restrictions as may be prescribed, to take credit of input tax charged on any supply of goods or services or both received by him which are used or in the be used in the course or furtherance of his business.
13.3 In the instant case, the Applicant is carrying on the business of wholesale and retail trading of grocery and general merchandise. The rooftop solar power system has been installed at the Applicant’s business premises for generation of electricity which is used for the requirements of such business. The inputs, input services and capital goods under consideration are stated to have been used in the erection, installation and commissioning of the said solar power system. Therefore, such inward supplies have a nexus with the Applicant’s business and satisfy the basic requirement under Section 16(1), subject to fulfilment of the other statutory conditions.
13.4 Section 16(2) further prescribes conditions for availment of ITC. These include, inter alia, possession of a tax invoice or debit note or other prescribed taxpaying document; receipt of the goods or services or both; compliance with the prescribed requirements relating to furnishing and communication of invoice details; payment of the tax charged in respect of the supply to the Government, subject to the provisions of the Act; and furnishing of the return under Section 39.
13.5 Consequently, the fact that the rooftop solar power system qualifies as plant and machinery and that Section 17(5)(d) is not attracted does not dispense with the requirements of Section 16. The Applicant can avail ITC only upon fulfilment of the applicable conditions prescribed under Section 16 and the Rules made thereunder in respect of each inward supply.
13.6 The Applicant is also required to comply with the other applicable provisions governing availment and utilisation of ITC, including the prescribed time limit for availment of credit and the restriction under Section 16(3) relating to depreciation where the tax component of the cost of capital goods and plant and machinery has been capitalised and depreciation has been claimed thereon.
13.7 Further, where the statutory conditions relating to payment of consideration and tax, as applicable, are not fulfilled within the prescribed period, the –psqsequences contemplated under Section 16 and the Rules would follow.
Thus, the present ruling is not to be understood as dispensing with any of the statutory conditions or restrictions applicable to availment of ITC.
14. Effect of surplus electricity under net metering:-
14.1 We have also considered whether the occasional injection of surplus electricity into the grid under the net-metering arrangement affects the Applicant’s eligibility in respect of the ITC relating to the rooftop solar power system.
14.2 As already observed, the occurrence of surplus generation in certain billing periods does not change the nature of the solar power system as plant and machinery. The system continues to be installed at the Applicant’s business premises and is used for generation of electricity for the requirements of the Applicant’s business, with surplus electricity being injected into the grid when generation exceeds consumption.
14.3 Therefore, the mere fact that electricity generated by the system is not consumed entirely by the Applicant in every billing period cannot, by itself, result in denial of ITC on the ground that the solar power system is not connected with the Applicant’s business. The essential character and use of the system have to be considered as a whole and not merely with reference to a particular billing period in which surplus electricity is generated.
14.4 At the same time, the Applicant’s actual export/injection of surplus electricity cannot be disregarded for all purposes. Any independent question concerning the taxability or exempt nature of such surplus electricity and the consequent applicability, if any, of the provisions relating to apportionment or reversal of ITC under Section 17(2) and Rules 42/43 would require examination separately on the basis of the precise legal and contractual nature of the net-metering arrangement and is not necessary for determining whether the rooftop solar power system itself is plant and machinery or whether Section 17(5)(d) applies inward supplies used for its erection and installation.
15.1 In view of the foregoing discussion, we hold that the rooftop solar power system installed by the Applicant at its business premises, comprising the solar panels, inverter, mounting/ support structures and associated components, is “plant and machinery” within the meaning of the Explanation to Section 17 of the CGST/KGST Act, 2017.
15.2 The fact that the solar power system is installed on the rooftop of the Applicant’s building and is capable of being dismantled and relocated does not alter its character as plant and machinery. Consequently, the restriction under Section 17(5)(d) is not attracted merely because the system is installed on the rooftop or because the inward supplies are used for its erection and installation.
15.3 The occasional generation of surplus electricity and its injection into the grid under the net-metering arrangement with BESCOM also does not, by itself, alter the character of the rooftop solar power system as plant and machinery or sever its nexus with the Applicant’s business.
15.4 Accordingly, the Applicant is eligible to avail ITC of the tax charged on the inputs, input services and capital goods used in the erection, installation and commissioning of the rooftop solar power system, subject to fulfilment of the conditions and restrictions prescribed under Section 16 and other applicable provisions of the CGST/KGST Act, 2017 and the Rules made thereunder.
15.5 It is further clarified that the present ruling is confined to the eligibility of ITC in respect of the inputs, input services and capital goods used in the erection, installation and commissioning of the rooftop solar power system, as specifically stated by the Applicant. Since the Applicant has not sought a ruling in respect of routine repair or maintenance expenditure, no finding is recorded in respect of such expenditure.
15.6 Thus, the answer to the question is that ITC on the inputs, input and capital goods used in the erection, installation and commissioning of the rooftop solar power system is admissible, subject to the of the conditions prescribed under Section 16 and other applicable provisions of the CGST/KGST Act, 2017 and the Rules made thereunder, and the same is not hit by Section 17(5)(d) merely on account of the system being installed on the rooftop of the Applicant’s building.
16. In view of the foregoing, we pass the following.
RULING
Question No.1 Whether the roof top solar system with installation and commissioning constitute plant and machinery which are used in the business of whole and retail sale of grocery and general items?
Answer No.1 The rooftop solar power system installed by the Applicant on the rooftop of the building qualifies as “plant and machinery” within the meaning of the Explanation to Section 17 of the COST Act, 2017, as it is an apparatus/ equipment used for generation of electricity in the course or furtherance of business and is not covered under the exclusions specified therein.
Question No.2 Whether we are eligible for Input Tax Credit on inputs, input services, and capital goods employed in the erection, commissioning, and installation of rooftop solar power system?
Answer No.2 The Applicant is eligible to avail ITC on the inputs, input services and capital goods used in the erection, installation and commissioning of the rooftop solar power system, subject to the fulfilment of the conditions prescribed under Section 16 and other applicable provisions of the CGST/ KGST Act, 2017 and the Rules made thereunder
