9911796707
TMI Blog2020 (10) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter called the Applicant) are registered under GST with GSTIN. 33AARFK9215C1ZD. They are engaged in the business in Edible oil and now starting a news business vertical which deals in 'Generation and Distribution of Renewable Energy' using the same name and the existing GSTIN. The applicant has sought Advance Ruling on: Whether proportionate claim of input tax credit for procurement of capital goods can be made for power generation business? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that in the new business they generate electricity through Photovoltaic Solar panels and sell it to third parties with whom agreements were made. The distribution is made using the grid facilities of Tamil Nadu Electricity Board, for which charges are paid to TNEB. They have stated that the Commission has framed "Central Electricity Regulatory Commission(Terms and Conditions for Recognition and Issuance of Renewable Energy Certificate for Renewable Energy Generation) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 'Capital goods used for both taxable and exempt purpose' and claim the Input tax as prescribed in Rule 43 of CGST Act. They claim that if the above ruling allows them to treat the Solar Panels as 'Capital Goods used for both taxable and exempt purpose then it attracts of the provisions of section 17 (2) of CGST Act. As per the provisions of Section 17 (2), the input tax component will become common credit that has to be treated with Rule 43, which prescribes the common credit be apportioned over period of 60 months. While calculating the above Eligible credit for a tax period (one month), they use the formula: Te=(E/F) x Tr. In which the resulting Te portion will be reversed. In the above formula, as given in Rule 43, "F" denotes the total turnover (in the State) of the registered person during the tax period. In their case, the Total turnover of the registered person during the tax period will consist of the Turnover of the existing oil business and the proposed Power generation business, as they do both the business under one GST registration number. Since the input tax component of Solar Panels being Common Credit (Tr), and the apportionment of common credit is based on the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant but had not furnished the write-up on each of the capital goods as undertook by them during the hearing. 4.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the appellant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media vide e-mail dated 03.07.2020. The applicant consented and the hearing was held on 30.07.2020 virtually. The applicant along with the Authorised representative participated in the hearing. A written submission was shared (via e-mail) and the same was taken on record. They reiterated their submissions and requested clarification on their eligibility to credit of tax paid on the Solar Panels, erection, maintenance and stated that this is their primary concern & if allowed, whether the turnover of the existing business should also form a part to arrive at the eligible credit. 4.2 In the written submissions furnished on 30.07.2020, it is inter-alia stated that:- * In the Regulated process of RE Power generation, all approvals from the Central Electricity Regulatory Commission (CERC) and Tamil Nadu Generation and Distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y generation business. The definition given in Para 2.1 (c) defines REC as "Certificate' means the renewable energy certificate issued by the Central Agency in accordance with the procedures laid down by it and under the provisions specified in these regulations." * They also referred the Report submitted by ABPS Infrastructure Advisory Private Limited, that was released by Ministry of New and Renewable Energy in its website on June 2009. In the specified report, they have elaborated on the REC mechanism and the proposed framework in India. In Para 1.4 they have given Overview on REC mechanism as "It is acknowledged that renewable energy generation entails production of certain environmental attributes apart from electricity generation per se. Thus, RE generator can sell two different products on account of renewable energy generation". * By referring to above regulations and the REC Mechanism practice that is adopted in India, it is specified that the REC is an output from the RE Power generation process. With this as a justification they want to consider REC as "Supplies Effected by the Capital Goods" as per Section 17 (2) and want to Claim Input Tax credit following Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d i.e., Turnover of the tax period of existing business + Turnover of the tax period of the new Power Generation business. 7. From the submissions before us, we find that the question which needs answer is on the eligibility to credit of the tax paid on the Inputs/Capital Goods and 'Input services' procured by them for setting up the Solar PV system and installation of the same and clarifications on whether the goods/services procured can be considered as 'Capital goods' & what should be considered as total Turnover for arriving at the attributable credit. The Question and the clarifications raised are covered under Section 97 (2) (d) of the GST Act 2017 and therefore admissible before this authority for consideration and pronouncement of ruling. 8.1 The applicant has proposed to engage in the business of 'Renewable Energy Generation' and has sought the approval of TANGEDCO for their proposal to Generate Electricity under the 'Renewable Energy Certificate Scheme. TANGEDCO has approved the proposal of the applicant to establish 3MW solar Power Plant and wheel the energy generated for Third Party under the REC Scheme vide Lr. No. CE/ NCES/ SE/ Solar/ EE/ SCB/ AEE 2/F.M/s. Kumaran O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied by them and has sought to clarify their proportionate eligibility to the credits of taxes paid for Installation of the Renewable Energy Generator in as much as the supply of REC is taxable. 9.1 Before proceeding further, the Statutory provisions relevant to Input Tax Credit are analysed as under. Section 16 (1) to (3) of CGST Act 2017 85 TNGST Act 2017 provides the "Eligibility and conditions for taking Input tax credit" is as follows: 16. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17(2) of the Act, which is given under for ease of reference: "(2) Where the goods or services or both we used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies." The provision relevant to blocked credits is given under Section 17 (5) of the Act, which is as under: (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- .............................. (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clearly evident that taxes paid on Inputs/capital goods and Input services used in the course or furtherance of business are permitted to be availed as per Section 16 of the Act. Section 17 (2) provides for apportionment of credits pertaining to supply of taxable supply when the said Inputs, Capital Goods and Input services are used to make both exempted and taxable supply. As discussed in Para 8.1, the RE power generator is used in the business by the applicant and the output of such RE Power Generator is Electricity and Renewable Energy Certificate. Thus to answer the question raised, we hold that the proportionate claim of Input Tax Credit is available for the applicant and the provisions of Section 17(2) applies to the case at hand. 10.1 Having answered the question raised, the clarifications sought are taken up for consideration. The applicant has sought clarification as to whether they could consider the solar panels and its installation cost as 'Capital Goods used for both taxable and exempt purpose and claim the Input Tax as Prescribed in Rule 43 of the Act.' In this connection, we find that the applicant has furnished a Statement as the List of Capital Goods containing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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