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TMI Blog2019 (10) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... such. It is a composite supply involving a creation of an immovable property which is part of the contract of setting up of a Solar Power Generating System and hence would be covered under Works Contract. This is distinguished in the above two entries and hence the work proposed to be done by the applicant is squarely covered under serial no. 38 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by as amended by Notification No. 27/2018 -Central Tax (Rate) dated 31.12.2018 and attracts tax as per that entry and not under Serial No.234 of Schedule I of Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017. The contention of the applicant that the solar power plant is not an immovable property is not acceptable for the reason that all the components cannot be recovered on retrieval of the plant and without those elements the solar power plant cannot be stated to work properly. What can be retrieved without cannibalization is only the solar panels and certain other elements which are only part of the entire project and hence the contention of the applicant cannot be accepted. - KAR ADRG 108/2019 - - - Dated:- 30-9-2019 - SRI. HARISH DHARNIA, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which would be entered into by him includes end to end activities, i.e. supply of various goods and services intended for setting up, operation and maintenance of a solar power plant. e. The intent of the contract would be that the entire contract would be undertaken by the applicant for supply of both goods and services and setting up of the solar power plant as well as transmission line for transmission of the electricity generated upto the storage or the GRID. f. The contract would be for a single price for the entire contract for supply of both goods and services in payment terms many be defined depending on various milestones. 4. The applicant submits that on introduction of Goods and Services Tax (GST) wherein the rate of tax on goods and services are notified Notification No. 1/2017-Central Ta (Rate) dated 28 th June 2017 and Notification No. 11/2017-Central Tax (Rate) dated 28 th June 2017 respectively. In case of goods, as the Notification No. 1/2017-Central Tax (Rate) dated 28 th June 2017, the rate of goods classifiable under 84 or 85 or 94 for solar power generating system is 5% (2.5% of CGST + 2.5% of SGST) and the relevant entry is provided below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be incidental to supply of goods. Accordingly, the applicant understands that the supply of solar power generating system attracts 5% of GST. 8. The applicant submits that the CGST Act defines composite supply, principal supply and mixed supply and the definitions are as under: 2(30) composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration .- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. 2(90) principal supply means the supply of goods or services which constitute the predominant element of a composite supply and to which, any other supply forming part of that composite supply is ancillary; 2(74) mixed supply means two or more individual supplies of goods or services, or any combination thereof made in conjunction with each other by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at 5%. 12. The applicant further submits that Ministry of New and Renewable Energy (MNRE) in various instances has also approved the entire BOQ consisting of various parts eg. Cables, Module mounting structure, spares, transmission lines, etc., as essential to solar power generating system and hence the concessions applicable have been extended to all goods to be used in solar power plant. Drawing of corollary, concessional rate of 5% should be applicable on all goods approved under BOQ by MNRE as well. Further, as highlighted above, services being incidental to such supply should also get covered as composite supply and taxable at the rate applicable to principal supply of solar power generating system, i.e. 5% (2.5% of CGST + 2.5% of SGST). 14. The applicant submits that the works contract is defined in CGST Act, 2017 in section 2(119) which is as follows: works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant are attached with purlins i.e. metal frames to provide stability to the working of the plant and prevent vibration/ wobble free operation. This cannot be qualified as attached to the earth as defined in Transfer of Property Act, under any one of the three clauses extracted above. 14.6 Further, the applicant attach the plant to the foundation which against cannot be comparable or synonymous to trees and shrubs rooted in earth. It is also not identical to imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition. Imbedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. 14.7 Hence, the applicant states that the attachment of the plant to the foundation at which it rests cannot fall in the third category (supra), for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made, the applicant understands that the activity cannot be a works contract and it should be considered as composite supply wherein supply of goods is principal supply and supply of service is merely incidental to supply of goods. 15. Sri Rajesh Kumar T.R., Chartered Accountant and duly authorised representative of the applicant concern appeared and reiterated the submissions already made in writing. Further, he has stated that this Authority has passed an advance ruling in the case of M/s Giriraj Renewable Private limited = 2018 (6) TMI 1127 - AUTHORITY ON ADVANCE RULINGS, KARNATAKA treating the parts of Solar Power Plant and supply of services of erection, installation and commissioning of the Solar Power Plant as composite supply as the supply of goods and services are naturally bundled. Further, he has also submitted a copy of the Advance Ruling issued by the Authority for Advance Ruling, Uttarakhand dated 28.08.2018 in the case of M/s Eapro Global Ltd. Roorkee = 2018 (9) TMI 1526 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND , in it was ruled as under: (a) Supply of solar inverter, controller, battery and panels would be covered under Solar Power Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject site and performance of all the obligations undertaken by the contractor under this Agreement in accordance with the Project. Requirements and includes all the work involved in relation to (i) Designing, engineering, procurement and supply of equipment, machinery, material, supplies, tools, strategic spares, other spare parts lists, an initial fill of greases, lubricants and other consumables, operating and maintenance manuals, equipment manuals, and the transportation, importation, handling, security and storage of all such items; (ii) Construction, including the furnishing of all supervision, labour and construction tools, consumables and equipment; (iii) Site security, management, supervision and control of all construction, start-up and testing activities; (iv) The performance of the Contractor s obligations during the Defects Liability Period, in accordance with the terms of this Agreement; and (v) Such other services as may be mutually agreed between the parties. All equipment, machinery, material, supplies, tools, strategic spares, other spare parts to be supplied by the Contractor for the Project shall be new. 16.3 The scope of the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 Cables - DC AC 15 Cable support, Cable trays etc 16 Battery Bank with Charger II Installation and Commissioning 1 Interconnection of solar PV Modules on MMS 2 Fixing the modules on MMS 3 Cabling from array to string combiner box 4 Cabling from SCB to Inverters 5 Cabling from Inverter to Transformer 6 Cabling from Transformer to HT Panel / Switch Yard 7 Control Room wiring and associated cabling 8 Laying the cables in the inverter control room III Guarantees and Warrantees 1 Warranty of the system in accordance with Clause 8.9 IV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Packing and forwarding E List of spares 1 Spares list required to be maintained at site will be provided by the Contractor and shall be bought by the developer F Post design drawings to be submitted to owner 1 As built drawings-2 soft copies and 2 hardcopies 2 0 M Manual - 2 soft copies and 2 hard copies G Permissions and approvals to be obtained by contractor 1 MNRE Excise Duty Exemption 2 MNRE Customs Duty Concession 3 Evacuation Clearance 4 Interconnection clearance / Bay construction approval 5 Metering scheme. CT/PT and Testing Approval 6 CEIG Approval 7 Electrical Inspector Approval for T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osite supply. 17.2 Sub-section (119) of section 2 of the CGST Act 2017 defines works contract as under: (119) works contract means a contract for building, construction, fabrication, completion. erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; In the pertinent case, the contract is for the engineering, procurement and commissioning of the solar power generating system and what is transferred is the entire power generating system including the civil works involved in the project. The project after completion at the time of transfer is an immovable property as there are no separate considerations for the individual components of the project. Further, the maintenance and other related services are also part of the contract and involve the maintenance of the project as a whole. 17.3 Regarding the issue of taxability of EPC contract of Solar Power Generating System it is seen that Serial No. 38 of Notification No. 11/2017-Central Tax (Rate) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguished in the above two entries and hence the work proposed to be done by the applicant is squarely covered under serial no. 38 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by as amended by Notification No. 27/2018 -Central Tax (Rate) dated 31.12.2018 and attracts tax as per that entry and not under Serial No.234 of Schedule I of Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017. This entry in serial no. 38 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by as amended by Notification No. 27/2018 - Central Tax (Rate) dated 31.12.2018 has come into effect from January 1st, 2019 and hence the contract of the applicant is covered under this entry after 01.01.2019. However for the period earlier to this date, the contract of the applicant would be covered under works contract under the description composite supply of works contract as defined in clause 119 of Section 2 of CGST Act, 2017 in entry no.3 of the Notification No.11/2017 - Central Tax (Rate) dated 28.06.2017 and is liable to tax at 9% under CGST Act and 9% under KGST Act, 2017. Further, an explanation has been inserted to the entry no.234 of Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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