2019 (8) TMI 1085 - AAAR - GST

Classification of supply - supply of goods or supply of services - activity of supply, design, installation, commissioning and testing of solar energy based water pumping systems - rate of GST - Challenge to AAR decision - HELD THAT - The Solar Energy based bore well water pumping system deserve classification under entry No. 234 of the Notification No. 01/2017-Central Tax (Rate) as Solar Power based devices . Benefit of Notification Nos. 24/2018-Central Tax(Rate) and 27/2018- Central Tax(Rate) inserting Explanation in the entry No. 234 ibid and inserting entry No. 38 ibid - HELD THAT - The benefit is available only when the Solar Power based devices i.e. the System is supplied along with other goods and Services, one of which being a taxable service specified in the entry at S. No. 38 ibid. A standard Solar Energy based bore well water pumping system comprises SPV panels, Structures, Storage tank, Controller, Pipe and Cables. The Appellant is also adding De-fluoridation unit (DFU) and also accomplishing the task of installation, commissioning, operation and maintenance of the System including DFU. DFU qualifies for other goods while Installation and Commissioning of the System are the Services which are not only taxable but are also being provided in relation to setting up of the System, a requirement of the Explanation to entry No. 234 ibid and entry No.38 ibid - Thus, the condition precedent to availment of the benefit of these entries i.e. supply of other goods and Services also, one of which should be a taxable service specified in the entry No. 38 , stands fulfilled. Thus, with respect to a Tender, identical to the Tender-Document No. 17/2016-17 ibid, which has been enclosed with the application dated 14.11.2018 filed by the Applicant/Appellant before the AAR, in terms of supply of Goods and Sendees, the activities of supply, design, installation, commissioning and testing of solar energy based water pumping systems, whose time of supply falls after 31.12.2018, are both supply of Goods and supply of Sendees in terms of entry No. 234, read with entry No. 38 ibid with rate of GST as prescribed under these entries.

Summary

Issues Involved:
1. Classification of the activity as supply of goods or services.
2. Applicable rate of GST on the activity.
3. Consideration of amendments in relevant notifications.

Issue-wise Detailed Analysis:

1. Classification of the Activity as Supply of Goods or Services:

The Appellant, a proprietor of a construction firm, was involved in a tender for designing, supplying, installing, commissioning, and maintaining solar energy-based water pumping systems. The Rajasthan Authority for Advance Ruling (AAR) classified these activities as a "Works Contract of Composite Supply," which was proposed to be undertaken for a government department. The AAR determined that the activity fell under Entry No. 3(iii) with HSN code 99544, attracting a GST rate of 12% (CGST @ 6% and SGST @ 6%).

2. Applicable Rate of GST on the Activity:

The Appellant contested the AAR's ruling, arguing that the rate of 12% GST was incorrect. They pointed out that the AAR did not consider the amendments made by Notification No. 24/2018-Central Tax (Rate) and Notification No. 27/2018-Central Tax (Rate), both dated 31.12.2018. These notifications amended the existing Notification No. 01/2017-Central Tax (Rate) and Notification No. 11/2017-Central Tax (Rate), respectively. The amendments specified that the value of supply of goods should be deemed as 70% of the gross consideration, and the remaining 30% should be deemed as the value of taxable services. This effectively reduced the GST rate to 8.9% (5% on goods and 18% on services).

3. Consideration of Amendments in Relevant Notifications:

The Appellate Authority carefully analyzed the notifications and found that the solar energy-based water pumping systems qualified under entry No. 234 of Notification No. 01/2017-Central Tax (Rate) as "Solar Power based devices." The Authority noted that the Appellant's activities included the supply of other goods and services, such as the installation and commissioning of the system, which were taxable services specified in entry No. 38 of Notification No. 11/2017-Central Tax (Rate). Thus, the conditions for availing the benefit of the amended entries were fulfilled.

Conclusion:

The Appellate Authority concluded that the activities of supply, design, installation, commissioning, and testing of solar energy-based water pumping systems, whose time of supply falls after 31.12.2018, should be classified as both supply of goods and supply of services. The applicable GST rate would be as prescribed under entry No. 234, read with entry No. 38 of the relevant notifications, effectively reducing the GST rate to 8.9%. The ruling by the Rajasthan AAR was modified accordingly, and the appeal was disposed of in these terms.