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TMI Blog2022 (5) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... ogical conclusion. As per Section 2(30) of the CGST Act, 2017 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. An illustration provided under the said definition provides that 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 - it is obvious that the supply of packing material, supply of service of insurance or transport is not independent of the supply of goods. Hence, the transportation of goods, supply of packing material and insurance are covered by the definition of composite supply with the supply of goods which is a principal supply in the illustration. The supply of different type of items such as Solar Panel, Controller, Solar Pump or Structure in different possible combinations, if any, without anyone of the goods being supplied as principal supply would be covered by the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al GST Act, 2017 (hereinafter also referred to as 'the CGST Act') read with Section 100 of the Rajasthan GST Act, 2017(hereinafter also referred to as 'the RGST Act') by M/s Utsav Corporation (Legal Name Sapna Gupta) Gurjar Ki Thadi, Jaipur (hereinafter also referred to as 'the appellant') against the Advance Ruling No. RAJ/AAR/2021-22/10 dated 03.09.2021. BRIEF FACTS OF THE CASE 3. M/s Utsav Corporation (legal name Sapna Gupta) Gurjar Ki Thadi, Jaipur (herein after referred as appellant) have filed appeal against Ruling issued by Authority for Advance Ruling Rajasthan vide order No. RAJ/AAR/2001-22/10 dated 03.09.2021. The Appellant has submitted appeal on online portal on 06.10.2021 and in hard copy on 18.10.2021. Fee of CGST Rs. 10000/- and SGST Rs. 10000/- have been paid vide Challan dated 23.09.2021. Brief facts of the case are as under: - 3.1 M/s Utsav Corporation, Gurjar Ki Thadi, Jaipur (hereinafter referred to as "appellant") is a proprietorship concern engaged in providing products and services in energy conservation, renewable energy sources, water infrastructure and water treatment project management. The appellant is engaged in supply of solar energy-based products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em is not the whole device it is made of Solar panel, Controller, Solar Pump, Structure etc. includes procurement, development, testing, commissioning etc hence, it is a mixed supply for goods and services and highest rate of GST will be applicable amongst goods supplied by the applicant. 3.2.7 Solar panel + Solar Controller + Solar Pump, Solar Pump + Solar Panel, Solar Pump + Controller, Solar Panel + Controller: -Since the above composition is the mixed supply of goods, as already discussed in above para, hence the highest rate of GST will be applicable amongst goods supplied by the applicant. 3.2.8 Supply of Solar water pumping system as a whole comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation of Solar water pumping system for drinking water application: - It is a works contracts Service and attracts 18%rate if GST S. NO. 3 of Heading 9954 (ii) of Notification No. 11/2017 dated 28.06.2017. 4. Aggrieved by the ruling, appellant has filed appeal before this forum on following grounds: - 4.1 Appellant submitted that technical details and use of the products 'Solar Controllers' and 'Structure' in the relevant context has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it aids in maximum use of power generated by the solar panel array. In the sunlight, the MPPT algorithm of solar drive extracts maximum power and also operates the motor at a variable speed based on the power input to drive. When the sunshine varies during the day, the power input to the drive also varies and the solar drive generates variable ratio to control the speed of the motor. The above drive with MPPT is assembled in an enclosure to form a solar converter. MPPT technology is not used in conventional electric pumps and it has no use there because the technology functions to maximize the use of DC power generated by solar panel array by the solar pumping systems only. It is a distinguishing factor of solar controllers. MNRE Guidelines for Specification for Solar Photovoltaic Water Pumping Systems specifically provide that Maximum Power Point Tracker (MPPT) shall be included to optimally use the power available from the SPV array and maximize the water discharge. Since in the case of appellant the controllers comprise of Variable Frequency Drive (VFDs) with MPPT, it is apparent that these controllers are designed only for use in solar pumping systems. Hence, solar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lock-gates, towers, lattice masts, roofs, roofing frame-works, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns), of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel However, in the case of appellant, the product in question is not general iron structures but 'Water Pumping System Mounting Structure'. They are parts of specific machines. Hence it is important to refer the Section Note according to which parts of machines are to be classified. Note 2 of Section XVI of Customs Tariff being relevant in the given case states as under: 2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules: (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings; (b) other parts, if suitable for use solely or principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was agreed that power cables cut to specific size and used as a protection to the wind mill from short circuit should be treated as an essential part of the Wind Turbine Controller. Hence above facts and judgment strengthen the facts that structures are parts solely for use in Solar water pumping system. Applying the above Section Note 2 to structures in the given case, these are parts not included in Chapter 84 or 85, so they out of (a) above. Thus structures are other parts and as per Note 2(b), since these structures are suitable for use only with Solar Water Pumping System having specific technical design and parameters for specified number of panels and weight etc., these structures are to be classified with the solar water pumping system only under Chapter 84. Hence the structures are classifiable under Chapter 84 of Customs Tariff by applicability of Section Note 2(b) to Section XVI of Customs Import tariff. Now for determining the GST rate on iron structures for solar pumping system sold on standalone basis, the relevant entry is as under: S. No. HSN Description Rate 201A 84, 85 or 94 Following renewable energy devices & parts for their manufacture 2.5% (b) So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above definition that a mixed supply is a combination which does not constitute a composite supply. Hence without applying and refuting the applicability of composite supply, conclusion regarding mixed cannot be reached. Now in the given facts, it was explained to AAR and substantiated by commercial practices and guidelines issued by the concerned Ministry of Central Government itself that the goods supplied together by the appellant are essential parts of a Solar Water Pumping System. The submissions are re-submitted as under: MNRE Guidelines for Specification of Solar Water Pumping System 2019-20 clearly state as under: A solar photovoltaic (SPV) water pumping system is a system powered by solar energy which consists of SPV panels and when sunlight falls on the solar panels it produces current which then feeds the motor to pump out the water. So the system is a solar power generating system. A SPV Water Pumping System typically consists of: * Pump Set (having AC or DC motor) * Solar Photo Voltaic (SPV) Array (made up of Solar Panels/Modules) * Solar Controller (SPV Controller) * Module Mounting Structures. 4.2.3 The characteristics, technical design and specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. 4.2.7 For materials contained in composite goods, i.e. Solar Water Pumping System, different heading refer to different parts of the solar pumping system like Heading 8413 for Pumps, Heading 8504 for Controller etc., by application of Rule 3(a), each heading has to be regarded as equall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that a reference to a heading should be taken to include a reference to that article presented in unassembled or disassembled form. 4.2.14 Now as it is understood while classification of solar pumping system under Customs tariff that Solar Water Pumping system is in itself a product and being composite goods or machine consisting of individual components, it is classified as the essential character component i.e. pumps, the classification of the product in question i.e. 'Solar Water Pumping System' under GST tariff for determining tax rate needs to be looked upon. 4.2.15 That the AAR has ruled as under in relation to this question: Since, Solar Water Pumping System is not the whole device it is made of Solar panel, Controller, Solar Pump, Structure etc. includes procurement, development, testing, commissioning etc. hence, it is a mixed supply for goods and services. 4.2.16 That it has been understood and acknowledged by the AAR that Solar Water Pumping System is made of Solar panel, Controller, Solar Pump, Structure etc. and these are the goods in question supplied together by the appellant. However, the understanding of the AAR that Solar Water Pumping System is not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity for supply of same goods in similar combinations where the appellant in exactly similar background asked the following questions: (a) Applicability of GST rate on supply of solar inverter, controller, battery and panels under "Solar Power Generating System" as a whole& whether such supply be called as 'composite or mixed supply' (b) Supply of solar inverter & solar panels together will fall under the definition of "Solar Power Generating System" or it will be a 'mixed supply' and the applicability of GST rate on supply of solar inverter & solar panels together. The Authority concluded as under: i) Supply of solar inverter, controller, battery and panels would be covered under "Solar Power Generating System" as a whole in terms of Sl. No. 234 of Notification No. 01/2017-CT(Rate) dated 28.06.2017 when supplied for said purpose and the applicable rate of GST will be 5% and such supply will be treated as composite supply. ii) Supply of solar inverter & solar panels together will fall under the definition of "Solar Power Generating System" (if the same are used for said specified purpose) in terms of SI. No. 234 of Notification No. 01/2017 - CT(Rate) dated 28.06.2017 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he items supplied in the transaction of sale are classifiable under Entry 201A of the Notification No. 1/2017-CT (Rate) dated 28.06.2017 amended as on date under respective HSN codes as above and hence the applicable tax rate on supply of all items is 5% and thus the tax rate applicable on supply in question shall also be 5% only. 4.3 Other Combinations: 1. Solar Controller + Solar Pump + Solar panel 2. Solar Pump + Solar Panel 3. Solar Pump + Controller 4. Solar Panel + Controller 4.3.1 The components sold by the appellant are all designed specifically and solely for use in a solar water pumping system. When these parts are sold in any combination as mentioned above, they are eventually intended for use in manufacture of a Solar water pumping system only. The combinations may vary according to the customer demands and requirements. 4.3.2 In case of B.H.E.L. v. Commissioner of Central Excise, Hyderabad 2008 taxmann.com 125 (Bangalore - CESTAT), Hon'ble Bangalore Tribunal has even held that an inverter charger card is entitled for benefit as a Solar power generating system: In the present case, the appellants have claimed exemption in respect of "inverter charger card" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) along with the installation is a composite supply of works contract, and the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time. The relevant portion of the S. No. 3 (Heading 9954) (ii) of the Notification No. 11/2017-CT (Rate) dated 28.06.2017 (as amended) is as under. - S.No. Chapter, Section or Heeding Description of Service CGST Rate % SGST Rate % 3 Heading 9954 (Construction services) (ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act. 2017. 9 9 In view of the above, we find that the proposed supply comprising of Solar Panel. Solar Controller, Solar Pump, Structure along with the installation shall attract GST under S. No. 3 of Heading 9954 (ii) of Notification No. 11/2017, dated 28.06.2017. 4.4.1 Appellant submitted that they have explained in the submission to the AAR but the same have been ignored without any rebuttal or reason for non-consideration and reproduced the relevant entries of tariff. 4.4.2 Appellant submitted that the entries in Tariff notifications for both goods and services ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 28th June, 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." 4.4.5 Appellant submitted that on a conjunctive reading and analysis of above entries in GST Tariff Schedule of goods and services, it comes to understanding that when goods under Entry 201A are supplied by a supplier along with other goods and services, one of which is taxable service under Si. No. 38 above, the value of supply of goods and value of supply of services has to be deemed as 70% and 30% of gross consideration respectively. The rate of GST on value of goods will be 5% and rate of GST on services will be 18%. In the given case, appellant has to provide goods falling under SI. No. 201A of the Goods Tariff clearly as per the understanding elaborated in the previous Question. Further, the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther goods and Services also, one of which should be a taxable service specified in the entry No. 38", stands fulfilled. 4.4.7 Appellant further submitted that, in case of Premier Solar System Pvt. Ltd. reported in 2019-TIOL-79-AAR-GST, a ruling was sought "(b) Whether the supply of solar irrigation water pumping systems along with design, erection, commissioning & installation is a 'composite supply' and the applicability of GST rate?" The Authority pronounced a Ruling that (i) Supply in question would covered under "Solar Power Generating System" as a whole in terms of serial no. 234 of Schedule-1 of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. (ii) Supply in question would be treated as "composite supply". (ii) 70% of the gross value of supply in question shall be the value of supply of said goods falling under chapter 84, 85 or 94 of the Tariff only would attract 5% GST rate and the remaining portion (30%) of the aggregate value shall be the value of supply of taxable service attracting 18% GST rate in terms of Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. Other goods used in these plants attract applicable GST rate. 4.4.8 Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% GST; (iii) Controller is neither a solar power based device nor a part of solar power based devices and, therefore, the same would fall under chapter heading 85 of GST Tariff which has a specific entry for Electrical Transformers, Static Converters and Inductors attracting 18% rate of GST; (iv) Structures are neither solar power based devices nor part of solar power based devices and, therefore, the same would fall under Chapter Heading 7308 attracting 18% rate of GST; (v) Solar Water Pumping System (Solar panel, Controller, Solar Pump, Structure) is not the whole device rather it is made of Solar Panel, Controller, Solar Pump, Structure etc. which includes procurement, development, testing, commissioning etc. and hence, it is a mixed supply for goods and services and the highest rate of GST will be applicable amongst goods supplied by the applicant; (vi) Solar Panel + Solar Controller + Solar Pump, Solar Pump + Solar Panel, Solar Pump + Controller, Solar Panel + Controller compositions are the mixed supply of goods, hence, the highest rate of GST will be applicable amongst goods supplied by the applicant; (vii) Supply of Solar water pumping system as a whole comprisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat can coordinate in a predetermined manner the performance of an electric motor. A controller performs variety of functions and is used with both direct current and alternating current motors. A controller includes means to connect the motor to the electrical power supply, and may also include overload protection for the motor, and over-current protection for the motor and wiring. A motor controller may also supervise the motor's field circuit, or detect conditions such as low supply voltage, incorrect polarity or incorrect phase sequence, or high motor temperature. Hence, a controller being an electrical item may be suitable for multiple uses in different applications including in solar power devices but the scope of its use can not be limited to a solar pump alone. There may be many items, electrical or otherwise, which may be suitable for use in a solar pump but such individual items, in standalone condition, can not be classified as solar power based devices or solar power generators. Accordingly, a controller itself, in standalone condition, being an independent electrical item suitable for multiple uses is appropriately classifiable under Chapter Heading 8504 covering 'elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods from the factory, the manufacturer produces to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, a certificate, from an officer not below the rank of a Deputy Secretary to the Government of India in the Ministry of New and Renewable Energy recommending the grant of this exemption and the said officer certifies that the goods are required for initial setting up of a solar power generation project or facility; and (2) the manufacturer of such goods furnishes an undertaking to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction, to the effect that - (a) the said goods shall be used only in the said project or facility and not for any other use; and (b) in the event of failure to observe conditions above, the manufacturer shall pay the dray which would have been leviable at the time of clearance of goods, but for this exemption." Perusal of the provisions of the notification reveals that the notification covers a wide range of items required for setting up of a solar power generation project or facility and the exemption was availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of, fall under 7308 or 7610 and attract 18% GST. In view of the above position which is also supported by the clarification referred to above, it is clear that a metal structure including Solar Panel Mounting Structure is correctly classifiable under Chapter Heading 7308 (if made of iron or steel) or 7610 (if made of aluminium) and the same will attract GST at the rates specified for the goods of those headings. Structures of iron and steel etc. as claimed by the appellant, can, therefore, neither be classified as solar power based devices nor called as solar power generators and the rate of tax as applicable to such devices or systems can not apply to the iron and steel structures. Held accordingly. 6.7. The appellant has also contested the ruling given by the AAR in the matter of classification of different type of goods and the rate of GST applicable thereon in various situations when such goods are proposed to be sold in different combinations. The AAR has given ruling to the effect that when such goods are sold in various combinations the same would attract the highest rate of GST applicable to any of the goods in the combination as the supply of different type of goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Supply of two or more goods or services or combination of both; (ii) The supply should be made in a natural bundle, i.e. the goods and/or services are provided as a combination in the ordinary course of business; (iii) The individual items (goods and/or services) cannot be supplied separately; and (iv) One of the supplies should be a principal supply. So far as the concept of "mixed supply" is concerned, the same is defined under Section 2(74) of the CGST Act to mean 'two or more individual supplies of goods or services, or any combination thereof made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply'. Mixed supply has been further illustrated in the following manner:- "A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately." After having gone through the definitions of 'composite supply' and 'mixed supply' as discussed above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f West Bengal as reported at 2019 (27) G.S.T.L.13.1 (App. AAR - GST). Once the question of the nature of supply, whether composite or mixed, is decided, the question that remains.to be addressed is the rate of GST applicable to such supplies. The different type of goods that are proposed to be supplied by the appellant in different possible combinations may attract different rates of GST. We find that as per the provisions of Section 8 (b) of the GST Act, 2017, concerning determination of tax liability on a mixed supply, "a mixed supply comprising of two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." Hence, we hold that the rate of GST applicable to the mixed supply of goods in different possible combinations as proposed by the appellant would be the rate which would be the highest of rates of GST applicable on standalone supply of individual items forming part of the proposed mix. The finding of the AAR is, accordingly, upheld in this regard. 6.8. Finally, the appellant has also challenged the ruling of the AAR in the matter of classification of the proposed simultaneous supply of Solar Water Pumping System as a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the remaining 30% portion of the aggregate value. We find that the Appellant has submitted copy of a sample proposal for scope of work for sub-contracting arrangement which requires the appellant to supply, to the main contractor, Solar Pumping Systems comprising of solar panels, sola pumps, solar controllers, structure and LED lights alongwith supply of services by way of installation and commissioning of solar energy based bore well pumping system. As submitted by the appellant, the main contractor working for PHED is also obliged to provide comprehensive operation and maintenance for a period of seven years besides the supply of goods and services sub-contracted to the instant appellant. In the instant case the appellant is obliged to supply a complete solar water pumping system alongwith the service of its installation and commissioning and, therefore, it would be appropriate to analyze the relevant notifications. On careful consideration of the relevant entries of the notifications, we find that Solar Energy based bore well water pumping system as a whole (hereinafter also referred to as "the System") as proposed to be supplied by the appellant qualifies as 'Solar Powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant in the instant case is supplying solar energy based bore well water pumping system and also carrying out the activity of provision of installation and commissioning of such systems. Hence; the appellant is supplying solar energy based devices and also providing the specified services, therefore, the condition as mentioned under respective entries of both the notifications are satisfied in the instant case. Thus, we find that the condition precedent to availment of the benefit of these entries supply of solar power based devices and services by way of installation in relation to setting up of solar power based devices are satisfied in the instant case. In view of above, we, hold that the supply of solar energy based bore well water pumping systems as . a whole. alongwith installation and commissioning of such systems involves both supply of goods and services in terms of entry No. 234 of Notification No.1/2017-Central Tax (Rate), dated 28.06.2017 read with entry No. 38 of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017 with rate of GST as prescribed under these entries... In drawing our conclusions as above, we have based our findings upon the ruling d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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