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TMI Blog2019 (11) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... ting system for a period of 5 years from the date of successful completion of trial run. There is both supply of goods and services in the case as per agreement and they are naturally bundled as a package - the contention of the applicant that it's a composite supply is agreed upon. Whether the composite supply of the applicant would fall under works contract or not? - HELD THAT:- In the present case, the applicant submits that the solar Plant is fixed to land for its efficient functioning and for this purpose, minor civil work is undertaken to fix the solar power Modules - It is evident from the said activities that the project has an element of permanence. But the applicant had taken a different stance by furnishing certain photographs of the project and stating that the solar modules/panels are merely fitted with nuts and bolts on mounting structure and claimed that it is a movable property. This presentation of the issue is in clever manner but not in bonafide manner in view of the fact that the very mounting structure is embedded permanently to the earth by civil foundation and support. In fact the solar modules are fixed on civil foundation and the degree/mode of annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheruvu Village, Near Tadipatri, Anantapur District in Andhra Pradesh. 3. The scope of the supply/ work under each of the above mentioned three contracts is as follows: A. Supply Contract: Design, Engineering, Manufacture/ Procurement Testing at manufacturer's works, Inspection, Supply, Packing and Forwarding of all plant and equipment including Mandatory Spares of 100MW grid connected Solar PV Power Project at Talaricheruvu (V), Near Tadipatri, Ananatpuramu District in Andhra Pradesh. B. Erection Contract: Providing of all services i.e. loading, inland Transportation for delivery at site, inland Transit Insurance, Unloading, Storage, Handling at site, Installation of the equipment, Civil Works Testing and Commissioning including carrying out guarantee tests in respect of all the equipment supplied for 100MW grid connected Solar PV power project at Talaricheruvu (V) Near Tadipatri Anantapuramu District in Andhra Pradesh. C. Operation Maintenance Contract: The Scope of the contract provides that the applicant shall provide operation and maintenance of Solar PV Plant along with grid connecting system for a period of five years from the date of success ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls under State jurisdiction, Assistant Commissioner, O/o. the Asst. Commissioner of State Tax, Steel Plant Circle, Visakhapatnam Division. Accordingly, the application has been forwarded to the State jurisdictional officer, with a copy marked to the Central Tax authorities to offer their remarks as per the Section 98(1) of CGST/APGST Act 2017. In response the jurisdictional officer concerned stated that there are no pending proceedings relating to the applicant and no proceedings were passed on the issue, for which the advance ruling is sought by the applicant. 2. Questions Raised Before the Authority: a. Whether the activities carried out by the applicant under all 3 contracts entered for establishment of Solar PV Power Project can be treated as Composite Supply? If yes, whether the said supply can be classified under SI. No.234 of Schedule I of the Notification No.1/2017- Central Tax (Rate) dt.28.06.2017 and GST shall be paid at the rate of 5% b. If not, whether GST can be paid on value relating to supply of solar modules alone at 5 % as per SI. No.234 of Schedule I of the Notification No.1/2017- Central Tax (Rate) dated. 28.06.2017. 3. APPLICANT'S INTERPR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the applicant submits that, though it has entered into three different contracts with APGENCO, it is only for the purpose of clear understanding of the scope terms of each activity and for better execution of the project. Hence, the applicant submits that all the contracts are meant for supply, installation and operation maintenance of the Solar Power Project only. Further, it is also stated that the consideration involved in the contract (consideration specified in all the three contracts put together) predominantly consists the value of solar modules being supplied as per the supply contract. The following table summarizes the break-up of consideration of all the 3 contracts: SI.No. Description Contract Value (in 'INR') 1. Supply Contact 351,74, 43,040 2. Erection Contract 51,37,87,418 3. Operation Maintenance Contract 12,17,30,542 TOTAL 415,29,61,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, the principal supply is supply of solar modules and for which the applicable rate of GST (CGST + SGST) is @ 5%. In view of the above, the applicant submits that the supply of goods and services to APGENCO for establishment of 100MV Solar PV Power Project and operation maintenance thereof is a composite supply and the principal supply is supply of solar modules and other equipment which would fall under the entry 234 of Schedule I of the Notification No. 1/2017- Central Tax (Rate). Accordingly, the applicable rate of GST is @ 5% (CGST and SGST) for all the supplies made/to be made by the applicant under the above said three contracts. Supply of goods and services for establishment of Solar Power Plant in the present case would not amount to Work Contracts: The applicant also submits that the supply of goods and services under three contracts to APGNECO would not fall under the definition of work contact as provided under Section 2 (119) of the CGST Act for the following reasons: Section 2 (119) of the CGST Act, Works contact means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No.1/2017- Central Tax (R) dated 28.06.2017, since these are the parts devices of the Solar Power Generating System. Similar notification is also issued under AP SGST act also. Therefore, effective rate of GST would be 5 % (CGST 2.5 % and SGST 2.5%). Accordingly, the applicant submits that, if Supply of Solar modules, transportation, civil work, transportation, testing, installation and commissioning services for establishment of Solar Power Projects and operation maintenance of Solar Power Project is not a composite supply under GST law, then, supply of Solar Modules and other accessories are liable to CGST @ 2.5 % (and SGST @ 2.5 %), civil work, erection, installation of Solar Power Plant and operation maintenance of Solar Power Plant Shall be liable to GST @ 18 %. Record of Personal Hearing: During personal hearing on 01.02.2019, the authorised representative Bipin Verma appeared and made the following additional submissions Additional Submission: At the outset, they reiterated that the activities carried out by the applicant under all 3 contracts entered for establishment of Solar PV Power Project shall be treated as Composite Supply. The principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d separate treatment for taxability of supply of PV modules and supply of balance components and services. Amendments effective from 1 January 2019: Further, it is submitted that recently the Government has issued two notifications viz., Notification No.24/2018- Central Tax (Rate) dated 31.12.2018 and Notification No.27/2018-Central Tax (Rate) dated 31.12.2018 amending earlier Notification No.1/2017- Central Tax (Rate) dated 28.06.2017 and Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 respectively. Through the above amendments, even in case of indivisible works contracts the material portion shall be subject to GST @ 5% rate and for this purpose 70% of the gross consideration shall be deemed to be the value for the material portion for assessment under entry 254 of Notification 1/2017-CT It is submitted that the above notifications would be applicable to cases wherein contracts are of indivisible nature wherein separate value for goods and services are not available. Whereas, in the applicant's case, contracts are divisible in nature and separate values goods and service are provided in the contracts. Therefore, the amendments made vide above said not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n obligate the applicant to take up all activities i.e., end to end setting up of Solar Power Plant right from procurement of equipment to Erection and Operation Maintenance of the same. The details are as under i. Supply Contract; ii. Erection Contract; and iii. Operation and Maintenance Contract. i) Supply Contract: Design, Engineering, Manufacture/ Procurement Testing at manufacturer's works, Inspection, Supply, Packing and Forwarding of all plant and equipment including Mandatory Spares of 100MW grid connected Solar PV Power Project at Talaricheruvu (V), Near Tadipatri, Ananatpuramu District in Andhra Pradesh ii) Erection Contract: Providing of all services i.e. loading, inland Transportation for delivery at site, inland Transit Insurance, Unloading, Storage, Handling at site, Installation of the equipment, Civil Works Testing and Commissioning including carrying out guarantee tests in respect of all the equipment supplied for 100MW grid connected Solar PV power project at Talaricheruvu (V) Near Tadipatri Anantapuramu District in Andhra Pradesh. iii) Operation Maintenance Contract: The Scope of the contract provides that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, renovation, alteration or commissioning etc., are involved satisfying two conditions, wherein one is transfer of property in goods and the other is the aforesaid activities being under taken on immovable property . There is no dispute in the first condition as it is evident that there is transfer of property in goods as per the agreement. Now we determine whether the activities are being under taken on immovable property. The term immovable property is not defined under GST Act. Section 3(26)of the General Clauses Act, 1897 defines immovable property as immovable property shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth . In the present case, the applicant submits that the solar Plant is fixed to land for its efficient functioning and for this purpose, minor civil work is undertaken to fix the solar power Modules. Further, the term attached to earth was defined under section 3 of Transfer of Property Act, 1882 a) Things rooted in the earth, as in the case of trees and shrubs, b) Things embedded in the earth, as the case of walls and buildings c) Things a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to the GST Act i.e. amendments of the GST rate vide notification No. 24/2018 Central Tax (Rate) dated: 31.12.2018 and notification No.27/2018,-Central Tax (Rate) dated: 31.12.2018, amending earlier notifications No.01/2017,-Central Tax (Rate) dated: 28.06.2017 and notification No. 11/2017,-Central Tax (Rate) dated: 28.06.2017 respectively, which came into force from 01.01.2019, added clarity to the rate of taxation of the Solar Power Plant Projects as such. Against S.No.234 in column 3 of the notification No. 24/2018-Central Tax (Rate) dated: 31.12.2018 following explanation is inserted. Explanation : if the goods specified in this entry are supplied, by a supplier, along with supplies of other goods and services, one of which being a taxable service specified in the entry at S.No.38 of the table mentioned in the notification No. 11/2017- Central Tax (Rate), dated: 28.06.2017 (G.S.R.690(E)), the value of supply of goods for the purposes of this entry shall be deemed as seventy per cent of the gross consideration charged for all such supplies, and the remaining thirty per cent of the gross consideration charged shall be deemed as value of the said taxable service. RUL ..... X X X X Extracts X X X X X X X X Extracts X X X X
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