GST Not Applicable on Solar Power Supply Due to Exemption for Electrical Energy: AAR Tamilnadu

In re Evolve Green Power Private Limited (GST AAR Tamilnadu)

A Power Purchase Agreement (PPA) has been executed between the applicant and the off-taker, under which the off-taker will procure solar power generated by the plant for consumption within their factory premises. This arrangement supports the off-taker’s energy cost optimization and sustainability goals, while aligning with their mission to promote clean and efficient energy solutions. In this back drop, the applicant has sought advance ruling on the following question:

The Tamil Nadu Authority for Advance Ruling (AAR) in In re Evolve Green Power Private Limited examined GST applicability on the supply of electricity generated through a rooftop solar power plant installed at the premises of an off-taker in West Bengal. The applicant, engaged in developing solar power projects, entered into a Power Purchase Agreement (PPA) to generate and supply electricity for captive consumption of the off-taker’s factory. The solar plant remained the asset of the applicant for the duration of the 25-year contract, after which ownership would be transferred to the off-taker. The applicant undertook all activities including design, engineering, procurement, construction, commissioning, and maintenance, while the off-taker provided rooftop space and certain support facilities.

The applicant sought clarity on whether GST was applicable on such supply of electricity, whether separate registration in West Bengal was required, and whether the ruling would apply to similar transactions nationwide. The AAR analysed the arrangement and observed that the agreement was solely for generation and supply of electricity, which qualifies as “goods” under GST law. However, electrical energy is classified under Tariff Heading 27160000 and is exempt from GST under Notification No. 02/2017-Central Tax (Rate).