Case Details: In re: Kanishk Steel Industries Ltd. (2025) 29 Centax 294 (A.A.R.-GST-T.N.)
Judiciary and Counsel Details
- S/Shri Balakrishna S & B. Suseel Kumar, Members
Facts of the Case
The applicant, an iron and steel manufacturer, proposed to replace its existing windmill power infrastructure with a solar power plant for energy requirements in the manufacture of taxable goods, i.e., steel. The applicant intended to generate electricity from the solar power plant and supply the same to the grid of Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), without entering into any wheeling and banking agreement for storing surplus or excess power. TANGEDCO, in turn, would provide energy credits to the applicant, which would be adjusted against the electricity consumed at the applicant’s manufacturing facility.
The applicant approached the Authority for Advance Ruling (AAR), Tamil Nadu, seeking a determination on its eligibility to claim input tax credit (ITC) under the CGST Act and the Tamil Nadu GST Act on goods and services used exclusively for the operation and maintenance of the proposed solar power plant. The applicant contended that the energy generated would be used only for the manufacture of taxable goods and would thus amount to captive consumption, thereby entitling it to full ITC benefit. The applicant also sought clarity on apportionment of credit in the context of exempt supplies.
AAR Held
The Hon’ble Tamil Nadu Authority for Advance Ruling held that the electricity generated from the solar power plant could not be considered captively consumed. The AAR observed that although the electricity generated was ultimately consumed at the applicant’s factory, it was first supplied to TANGEDCO, a distinct legal entity, and the energy credits were later adjusted against the electricity consumed at the applicant’s facility. As there was no wheeling and banking agreement for storing surplus energy, the transaction of supplying electricity to TANGEDCO constituted a ‘supply’ under GST law. Under GST provisions, electricity is classified as an exempt supply, attracting a nil rate of tax.
Therefore, the AAR held that the applicant was not eligible to claim ITC on any goods and services used exclusively for the operation and maintenance of the solar power plant, as these were used to provide an exempt supply. The ruling underscored that ITC could not be claimed on goods or services used for exempt supplies, even if the electricity was eventually consumed by the applicant’s manufacturing facility.
List of Notifications Cited
- Notification No. 2/2017-Central Tax(Rate), dated 28-6-2017
