In re SBF Ispat Private Limited (GST AAAR Rajasthan)
The appeal arose from an order of the Rajasthan Authority for Advance Ruling (AAR), which denied input tax credit (ITC) on inputs, capital goods, and input services used for setting up and operating a solar power plant intended for captive consumption. The appellant, engaged in the manufacture of TMT Bars and MS Billets, proposed to establish a 20.5 MW solar power project in Rajasthan for generating electricity to be used in its manufacturing activities.
According to the appellant, the electricity generated by the solar power plant would not be sold to third parties. Instead, the energy generated would be transferred to the grid of RVPN/DISCOM, which would provide energy credits. These credits would then be adjusted against the electricity consumed at the appellant’s manufacturing unit, and the electricity bill would reflect such adjustments.
The Rajasthan AAR had ruled that the appellant was not eligible to avail ITC on inputs, capital goods, or input services used in the design, engineering, erection, installation, commissioning, and operation of the solar power plant. The AAR held that the solar power plant generated electricity, which constituted an exempt supply under GST, and the inward supplies used for establishing and operating the plant were attributable to such exempt supply. It also held that the relevant capital goods and inputs did not qualify as “plant and machinery” used for making taxable outward supplies and that ITC was blocked under Sections 17(5)(c) and 17(5)(d) of the CGST/RGST Act.
