2018 (12) TMI 475 - AAR - GST

Classification of goods - rate of GST - turbine generator set to be supplied by the applicant to the buyer for use in waste-to-energy project - whether classified as Renewable energy devices and parts for the manufacture of waste to plants/ devices , attracting 5% levy? - Sl.No.234 of Schedule 1 of Notification 1/2017 - IGST (Rate) dated 28.06.2017. Held that - A turbine is a rotary mechanical device that extracts energy from a fluid flow and converts it into useful work. A steam turbine is a device that extracts thermal energy from pressurized steam and uses it to do mechanical work on a rotating output shaft. Therefore a Turbine is not a device that converts waste to. In fact in the instant case the waste is used to generate steam and the steam runs the turbine to generate electric power. Turbine itself does not work on waste but converts steam into energy. The conversion of waste into energy is done, only at the stage of combustion. The concessional rate of 5% of IGST is available to only such devices which convert waste into but not for the devices that converts energy from one form to the other form. Turbine is not a renewable energy device because the turbine at no stage acquires the nature of a device which converts waste to energy. The waste has already been converted into heat energy through the process of the burning/combustion which in turn is utilized to convert water into steam and the said steam runs the turbine to generate electric power. The turbine runs on steam irrespective of whether the steam is obtained by combustion of waste or any other means. Therefore the fact that in this particular case the steam was generated out of waste cannot lead to the conclusion that the turbine is a renewable energy device. The same turbine can run equally well on steam generated by use of coal etc. - turbine in question will not qualify to be covered under serial number 234 of Notification No. 1/2017-lntegrated Tax(Rate) dated 28.06.2017. Ruling - The Turbine Generator Set to be supplied by the applicant for use in waste to energy project is not covered under Sl.No.234 of Schedule I of Notification No. 1/2017 dated 28.06.2017.

Summary

Issues Involved:
1. Applicability of Sl.No.234 of Schedule I of Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017 to the supply of Turbine Generator sets.
2. Determination of the rate of tax applicable on the supply of Turbine Generator sets for waste-to-energy projects.

Issue-wise Detailed Analysis:

1. Applicability of Sl.No.234 of Schedule I of Notification No. 1/2017-Integrated Tax (Rate):

The applicant, a manufacturer of steam turbines, sought an advance ruling on whether the turbine generator set supplied for use in waste-to-energy projects falls under Sl.No.234 of Schedule I of Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017, which lists "Renewable energy devices and parts for the manufacture of waste to energy plants/devices," attracting a 5% levy.

The applicant argued that the steam turbines supplied to waste-to-energy projects should be classified under this entry, as they are specifically designed for such projects and cannot be used in normal power projects. The applicant referenced the Customs Tariff Act, 1975, stating that the turbines fall under tariff heading 84, which deals with machinery and mechanical appliances.

The applicant further supported their claim by highlighting the broader scope of the IGST Notification compared to previous Central Excise Notifications, which were limited to "waste conversion devices producing energy." They contended that the IGST Notification includes all equipment used in the entire process of converting waste to energy, not just the devices that directly convert waste to energy.

2. Determination of the Rate of Tax Applicable:

The Authority for Advance Rulings examined the applicant's submissions, the relevant facts, and the interpretation of the law. It was noted that the turbine is a device that converts steam into mechanical work, not a device that directly converts waste into energy. The waste is used to generate steam, which then runs the turbine to produce electricity. Therefore, the turbine itself does not work on waste but converts steam into energy.

The Authority concluded that the turbine is not a renewable energy device as it does not convert waste into energy. The turbine operates on steam, which can be generated by various means, including the combustion of waste or coal. Consequently, the turbine does not qualify to be covered under Sl.No.234 of Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017, and is not eligible for the 5% IGST rate.

Ruling:

The Turbine Generator Set to be supplied by the applicant for use in waste-to-energy projects is not covered under Sl.No.234 of Schedule I of Notification No. 1/2017 dated 28.06.2017.