TMI Blog2020 (10) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... that the credit of Input tax on the inputs/inputs services used in setting up of the Renewable Energy Generator in the furtherance of their business, is permitted under these provisions. The applicant has stated that they are in receipt of the goods/services, possess the invoices and paid the taxes and thus fulfills the conditions stipulated under Section 16(2) and have not claimed depreciation under Income-tax provisions, thus have fulfilled provisions of Section 16(3) of the Act. The 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 - 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 - 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. Whether they could consider the solar panels and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s. Kumaran Oil Mill, No.19, Ayyasamy Nagar, Palayakottai Road, Kangayam, 638 701.(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 procur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try in which they have, or will have, a recognised face value; stamp-impressed paper; banknotes; chequ forms; stock, share or bond certificates and similar documents of title [other than Duty Credit Scrips]. Based on the Circular No. 46/20/2018-GST, these REC fall under the said HSN which will be charged GST at 12%. The Electricity Generated is sold under HSN 2716 which is exempt by Notification No. 2/2017-C.T.(Rate) dated 28th June 2017. The applicant has stated that PV solar modules attracts GST 5% under HSN 8469 and the setting up costs attracts GST @ 18%. 2.2 The applicant has further stated that based on the above facts, the sales turnover of the business consists of taxable supply and exempt supply. The applicant requested to know whether they can 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 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 compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me dated 11.12.2019, consent letter dated 12.11.2019 of Aravind Eye Hospitals to become Third Party User with the applicant. 3.2 The state jurisdictional officer who has the administrative jurisdiction over the applicant, attended the hearing. He gave a written submission quoting Karnataka Advance Ruling in the case of Shri. Kesav Cement and Infra Limited = 2019 (10) TMI 570 - AUTHORITY FOR ADVANCE RULING, KARNATAKA and stated that the applicant is doing business both in taxable and exempted goods and they can avail the eligible input tax credit, and it can be determined as per the provisions of the relevant provisions of the Act. 3.3 The applicant vide their letter dated 17.02.2020 received on 26.02.2020, furnished the list of Capital Goods and Services that were used in commissioning of their Solar Power Plant 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 med ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The tax has been actually paid by the supplier. All the invoices are reflected in GSTR 2A of the applicant. 4. All the payments with respect to capital goods are made. 5. Have not claimed depreciation on the Input Tax Credit portion of capital goods and are not capitalised in books. With respect to section 17(2), the capital goods used in RE Power generation results in both taxable turnover and exempt turnover. Since REC and Electricity are in two different forms, they want to clarify whether both REC and Electric Energy can be considered as Supplies Effected by the Capital Goods and claim input credit proportionately. They have referred to CERC (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations,2010 of The Electricity Act, 2013, which governs the electricity 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 Infrastru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se REC can be traded in Power Exchange and are subjected to GST (if, 12% as has been clarified vide Circular No. 46/20/2018-GST. The contention of the applicant is that in the RE power plant set up by them under the REC scheme, electricity and REC are the two outputs available to them, while supply of Electricity is exempted, REC is chargeable to GST. The applicant has sought Advance Ruling on the Question: Whether proportionate claim of input tax credit for procurement of capital goods can be made for power generation business? They have further required clarification on whether they can 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 CGST Act; and whether they can apportion the common credit based on the total turnover of the registered person for the tax period 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant is chargeable to GST while the electrical Energy generated and supplied is exempted under GST. The applicant having been approved to establish 3MW solar Power Plant under the REC Scheme, has established the Solar Power Plant by procuring the necessary inputs/capital goods and services. It is without doubt that if the electrical energy is not generated and wheeled, REC equivalent to that Electrical Energy will not be available for trading. Thus it emanates that with the installation of the Renewable Energy Generator, the applicant generates Electrical Energy (exempted under GST) and gets REC(taxable under GST). i.e., on installation of the Renewable Energy Generator, the applicant engages in the generation of Electrical energy resulting in both exempted and taxable supply. The applicant has stated that the condition for availing Input Tax under Section 16 (2) and Section 16 (3) are satisfied 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as furnished the returns. Section 16 (3) provides that if depreciation is claimed the ITC on the said tax component is not available. The plain reading of the above statute and applying to the case at hand, prima facie, it indicates that the credit of Input tax on the inputs/inputs services used in setting up of the Renewable Energy Generator in the furtherance of their business, is permitted under these provisions. The applicant has stated that they are in receipt of the goods/services, possess the invoices and paid the taxes and thus fulfills the conditions stipulated under Section 16(2) and have not claimed depreciation under Income-tax provisions, thus have fulfilled provisions of Section 16(3) of the Act. 9.2 Section 17 of the Act gives the provisions relating to Apportionment of credit and blocked credits. The provision relevant to apportionment in case of usage for both taxable and exempted supply is given under 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the `Renewable Solar PV Generator installed, electricity is generated and the applicant is automatically eligible to the REC equivalent to such generation of electricity. To become eligible to REC, it is necessary to generate electricity using RE sources and thus it cannot be held that the output of PV Generator is only `Electrical Energy but REC is also as an output of generation of Electricity using RE sources. Hence Provisions under Section 17 (2) of the Act is applicable to the case at hand. Section 17 (5) which states the blocked credits, under (c ) and (d) provides blocking of credits works Contract service / construction but it excludes `Plant and Machinery which is defined under the Explanation to the Section. Applying the above to the case at hand, it is evident that the Solar PV Cell Generator being a Plant the related Credits are not blocked under this Section. 9.3 From the above statutory provisions, it 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 taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at by applying Rule 42 of the GST Rules. 10.2 The applicant has further sought to clarify as to whether they could apportion the common credit using total turnover of the registered person for the tax period, i.e., Turnover of the tax period of existing business + Turnover of the tax period of the new Power Generation business. We find that both under Rule 42 and Rule 43, the F in the Formula denotes the Total Turnover[in the State] of the registered person during the tax period . It is clear that the rule wants the total turnover to be considered against F in the formulae under Rule 42 Rule 43 of the GST Rules. In the applicant s case at hand, therefore, we clarify that the Total Turnover of the Registered Person should include the Turnover of Edible Oil Business and Total Turnover of Power Generation Business . 11. In view of the above, we Rule as under: RULING The applicant is eligible for Proportionate claim of Input Tax Credit as per Section 17 (2) of the CGST/TNGST Act read with Rule 42/Rule 43 of CGST/TNGST Rules 2017 on the Goods/Services used in installation of Renewable Power Generation Plant under the REC Scheme - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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