2022 (7) TMI 910 - AAAR - GST

Liability to GST - product Solar DC Cables to be used in the manufacture of Solar Power Generating System/ Solar Power Generator - Eligibility for benefit of Entry at Sr.No. 234 under Schedule-I of Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 or not - HELD THAT - Section 10 of Chapter II of Indian Contract Act, 1872, as referred by appellant, says that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. The purchase orders submitted by appellant may be treated as contract if they follow conditions prescribed under Indian Contract Act. 1872 i.e. they are made for lawful consideration and with a lawful object and made by the free consent of both parties. The Entry No. 234 appearing under Schedule-I to the Notification No.01/2017-IT (Rate) dated 28.06.2017 which provides applicable rate of GST at 5% on supplies of renewable energy devices parts for their manufacture viz. Solar power generating system, falling under Chapter 84.85 or 94, was omitted vide Notification No. 8/2021-IT (Rate) dated 30.09.2021. The description of goods covered under Entry No.234 now appears at Entry No.201A under Schedule-II to the Notification No. 01/2017-IT(Rate) dated 28.06.2017, amended vide Notification No. 8/2021-IT (Rate) dated 30.09.2021 w.e.f. 1.10.2021, which provides for applicable rate of GST at 12%. The description of renewable energy devices parts for their manufacture viz. 'Solar power generating system' appearing at entry No. 234 of schedule-I now stands amended as 'Solar power generator' under Entry No. 201A of schedule-II. The product in question viz. Solar DC Cables supplied for Solar Power Generating System, classified under Chapter 85. forms integral part of Solar Power Generating System is eligible for benefit of entry at Sr.No. 234 appearing under Schedule-I to Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 and liable to be taxed @ 5% GST upto 30.09.2021. Thereafter the same will be covered under entry Sr.No. 201A appearing under Schedule-II to the Notification No.01/2017-IT (Rate) dated 28.06.2017 amended vide Notification No. 08/2021-IT (Rate) dated 30.09.2021 and liable to be taxed @ 12% GST w.e.f. 01.10.2021.

Summary

Issues Involved:
1. Applicability of a concessional GST rate of 5% on Solar DC Cables under Notification No. 1/2017-Integrated Tax (Rate).
2. Validity of purchase orders as legal documents for claiming GST concessions.
3. Determination of whether the supply of Solar DC Cables includes the provision of services.

Detailed Analysis:

Issue 1: Applicability of Concessional GST Rate
The appellant, a manufacturer of various cables including Solar DC Cables, sought a ruling on whether these cables qualify for a 5% GST rate under Sr.No. 234 of Notification No. 1/2017-Integrated Tax (Rate). The notification specifies that goods falling under Chapter 84, 85, or 94, if used as parts for renewable energy devices like Solar Power Generating Systems, are eligible for a concessional rate. The appellant argued that their Solar DC Cables fall under Chapter 85 and are integral to Solar Power Generating Systems, thus qualifying for the 5% rate.

The Gujarat Authority for Advance Ruling (GAAR) initially observed that while Solar DC Cables are integral to Solar Power Generating Systems, the appellant did not provide sufficient contractual documentation to confirm their use in such systems. Consequently, GAAR refrained from ruling on the concessional rate.

Upon appeal, it was determined that the appellant's Solar DC Cables indeed fall under Chapter 85 and are integral to Solar Power Generating Systems. The appellate authority confirmed that the product is eligible for the 5% GST rate under Sr.No. 234 of Notification No. 1/2017-Integrated Tax (Rate) until 30.09.2021. From 01.10.2021, the applicable rate is 12% as per the amended notification.

Issue 2: Validity of Purchase Orders
GAAR had previously ruled that purchase orders submitted by the appellant were not legal documents and thus insufficient for claiming the concessional GST rate. The appellant argued that in the digital economy, documents such as tender/contract/agreement/technical specifications are often not readily available, and purchase orders should suffice.

The appellate authority referred to Section 10 of the Indian Contract Act, 1872, which states that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration, and with a lawful object. It was concluded that the purchase orders submitted by the appellant met these criteria and thus constituted valid contracts. Consequently, the appellant fulfilled the conditions prescribed in Board Circular No. 80/54/2018-GST for availing the GST concession.

Issue 3: Provision of Services
GAAR had expressed concerns that the supply of Solar DC Cables might include services, which could affect the applicability of the concessional GST rate. The appellant clarified that any services like packing, freight forwarding, and transit insurance are naturally bundled with the principal supply of goods and do not constitute separate taxable services.

The appellate authority agreed with this interpretation, noting that these services are integral to the sale of goods and do not extend beyond the sale itself. Affidavits from Mundra Solar PV Limited and Adani Green Energy Limited confirmed that the purchase orders involved only the supply of goods, with no additional services provided.

Conclusion:
The appellate authority modified the GAAR ruling, confirming that Solar DC Cables used in Solar Power Generating Systems are eligible for the 5% GST rate under Sr.No. 234 of Notification No. 1/2017-Integrated Tax (Rate) until 30.09.2021, and thereafter, a 12% GST rate applies as per the amended notification. The purchase orders were deemed valid contracts, and the incidental services were considered naturally bundled with the supply of goods.