In re Kanishk Steel Industries Limited (GST AAAR Tamil Nadu)
This case revolves around a dispute filed by Kanishk Steel Industries Limited (Kanishk Steel) against an Advance Ruling issued by the GST Authority for Advance Ruling (AAR), Tamil Nadu. The core issue was whether the company was eligible to claim input tax credit (ITC) on the goods and services used for the installation and maintenance of a new 10.2 MW solar power plant intended for captive consumption. The AAR had ruled against the company, stating that the generation and supply of electricity were an exempt supply, thereby making the ITC ineligible.
Background and Appellant’s Argument
Kanishk Steel, a manufacturer of steel products, planned to replace its existing windmill power plant with a solar power plant. The electricity generated would be used for captive consumption at its factory. A consolidated contract for the design, installation, and maintenance of the plant was awarded to a single contractor. The company sought an advance ruling on two key points:
- Eligibility for ITC on inputs and capital goods used for the solar power plant.
- Eligibility for ITC on inputs and services for running the plant.
The AAR ruled that since electricity is an exempt supply with a ‘Nil’ tax rate, the ITC on inputs and services used for its generation and supply is not available, as per Section 17(2) and Section 17(3) of the CGST/TNGST Act, 2017. The AAR held that the supply of electricity to TANGEDCO (Tamil Nadu Generation and Distribution Corporation) for “wheeling” and subsequent adjustment against power consumed by the factory did not qualify as “captive consumption” but rather an “exempt supply.”
