ITC credit availability

Under GST in India, ITC can be claimed on goods and services used for business purposes. For wind mills (renewable energy projects), expenses like installation costs and taxes paid on those expenses can typically be eligible for ITC if used for business. 

When selling the wind mill, if it is a taxable supply under GST, you would need to consider GST  implications on the sale. But if the sale is exempt (like some renewable energy equipment sales might be), ITC rules might differ. 

1. ITC on erection/installation of windmill

• Section 17(5)(c) & (d), CGST Act: ITC is blocked on works contract services or goods/services used for construction of immovable property (other than plant & machinery).

• However, plant & machinery is specifically defined to include windmills, their foundation and structural support.
  ✅ Therefore, ITC on erection, installation, and related expenses for windmills is allowed, provided the windmill is used for making taxable outward supplies (like sale of electricity).

2. At the time of sale of windmill

• Sale of windmill (after years of use) is considered supply of goods (since it is movable plant & machinery).

• GST will be payable on transaction value under HSN 8502 (electric generating sets, wind powered), generally 12% GST.

• The ITC availed earlier on erection/installation does not need reversal at the time of sale, since it was correctly availed.

3. If it was treated as immovable property

• If windmill was capitalized as immovable property (for example, permanently embedded and not treated as plant & machinery), then ITC on erection/construction would not have been available in the first place.

⚖️ Summary:

• If windmill is treated as plant & machinery → ITC on erection/installation is eligible.

• On later sale of windmill, GST is payable on sale value, but no ITC reversal is required.

ITC on GST paid for erection/installation of a windmill is generally available if the windmill is used to make taxable outward supplies and the expenses are for business. However, GST paid on construction of an immovable property on the taxpayer’s own account may be blocked under Section 17(5)(c)/(d). Whether a windmill is movable or becomes an immovable structure depends on its design, foundation and manner of installation; the descripttion “windmill” alone does not settle the issue. If the windmill is later sold, determine whether the sale is taxable and whether the item is treated as goods or immovable property—the sale itself does not automatically make earlier ITC eligible.

For an ITC review, retain contracts, invoices, asset and installation records, and evidence of the windmill’s use and subsequent sale. GST treatment of the sale and any ITC reversal may also depend on how the asset was capitalised and the applicable rules.

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ITC on windmill erection, and GST on its sale – two corrections to close this:
• Sec 17(5)(c)/(d) does not block it, since "plant and machinery" covers foundation and structural supports. But ITC also requires use for taxable supplies. One correction to an earlier reply: sale of electricity is exempt (HSN 2716), so if the windmill only sells power to the grid/DISCOM, ITC is not available (Sec 17(2)/(3)). ITC is available if the power is used captively for your taxable manufacture/supply, proportionately if mixed.
• On sale of the windmill: if ITC was taken, pay the higher of (a) the ITC taken less 5 percentage points per quarter of use, or (b) tax on the transaction value (Sec 18(6), Rule 44(6)). The earlier statement that no reversal is ever needed is incomplete.
• Rate update: from 22 Sept 2025, wind-operated electricity generators and specified renewable-energy devices/parts attract 5% (earlier 12%). Check the exact HSN entry (8502 31 etc.) in Notification 9/2025-CT(R).
• If no ITC was taken because output was exempt, GST is still payable on the sale at the applicable rate. Keep the capitalisation and ITC records to support the computation.