Solar Power Generating System’ is composite supply not work contract: AAR Uttarakhand

Facts: M/s. Premier Solar (P) Limited (“the Applicant”) is engaged in the manufacturing of “Solar Power generation system” including services viz. designing, erection, commissioning & installation for the same.

Issues Involved: Whether the supply of solar rooftop power plant and solar irrigation water pumping system along with design, erection, commissioning & installation is a “composite supply” or “mixed supply” and what will be the rate of GST on such supply?

Applicant’s Interpretation of law: Applicant claimed that in the transaction the supply of goods represents “principal supply” and provision of service in supply of solar power generation system constitutes merely 10% of the whole cost of the plant or system. Therefore, present contract of supply should be treated as composite supply and not mixed supply in as much as it fulfils the following conditions: • goods and services both involved in the supply in question • service element is ancillary to principal supply of goods • both he supplies are dependent upon each other since the goods supplied can be put to use only after erection, commissioning and installation can be done if goods are available.

Held: The Hon’ble AAR of Uttarakhand vide its Advance Ruling No. 15/2018-19 dated January 23, 2019 held that supply is composite supply covered under “Solar Power Generating System” in terms of serial no. 234 of Schedule-I of the Notification No. 01/2017-Central Tax (Rate) dated June 28, 2017. In respect of the question that can supply be treated as “works contract”, the AAR answered in negative.

Further, it was discussed that for the supply to fall under the category of works contract it has to qualify the definition of “immovable property” given under section 3 of the Transfer of Property Act. In the present case, the structure which was built with the help of nuts and bolts no a platform or foundation intended to provide stability to the working of solar power plant could be easily detached as and when required. In reference to this, ratio laid down by the Hon’ble Supreme Court were relied on namely, CCE Vs Solid & Correct Engineering Works & Ors, Sirpur Paper Mills Ltd Vs CCE [1998 1 SCC 400].

Further, the Authority referred to recommendation made by the Group of Ministers at the 31st GST Council meeting wherein it was clarified that 70% of gross value of supply shall be the value of supply of “Solar Power generation System” attracting 5% GST rate and remaining portion (30%) of the aggregate value shall be the value of supply of taxable services attracting 18% GST rate in term of notification No. 27/2018-Central Tax (Rate) dated December 12, 2018.