In re Brightstone Developers Private Limited (GST AAR Karnataka)
a) Whether the supply of turn-key Engineering, Procurement & Construction (EPC) Contract for construction of solar power plant wherein both goods and services are supplied can be construed to be a composite supply in terms of Section 2(30) of CGST Act, 2017?
The supply of turnkey Engineering, Procurement and Construction (EPC) Contract for construction of solar power plant wherein both goods and services are supplied can be construed to be a composite Supply in terms of Section 2(30) of CGST Act, 2017.
b) Whether the supply of ‘Solar Power Generating System’ is taxable at 5% GST?
Solar Power Generating System is goods and if it is supplied as goods would attract the tax at the rate of 5% (2.5% CGST and 2.5% SGST) as per entry no. 234 of Schedule I of Notification No. 1/2017 – Central Tax (Rate) dated 28.06.2017. But in the pertinent case, what is supplied is not goods as 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.
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 1E, 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 COST Act and 9% under KGST Act, 2017.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
1. M/s Brightstone Developers Private (called as the ‘applicant’ hereinafter), having GSTIN number 29AAGCB6259H1ZC, has filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules 2017, under Section 97 of the KGST Act, 2017 read with Rule 104 of KGST Rules 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000-00 each under the COST Act and the KGST Act.
2. The Applicant is a Private Limited. Company and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of the following question:
a) Whether the supply of turn-key Engineering, Procurement & Construction (EPC) Contract for construction of solar power plant wherein both goods and services are supplied can be construed to be a composite supply in terms of Section 2(30) of CGST Act, 2017?
b) Whether the supply of ‘Solar Power Generating System’ is taxable at 5% GST?
3. The applicant furnishes some facts relevant to the stated activity:
a. The applicant states that he wishes to engage in EPC Contract for supply of Solar Power Generating System and the operation and maintenance of the installed solar power plants.
b. The applicant wishes to enter into contract with various developers who desire to set up and operate solar photovoltaic plants for supply of power generated. The applicant also wishes to be project developer wherein they would be engaged in operation of renewable energy power plant projects.
c. Typically .a turnkey contract would be entered by the applicant to do end to end setting up of a solar power plant which includes supply of various goods (such as modules junction boxes, module supporting structures, transformers, switchgears, etc.) as well as complete design, engineering and studies transportation unloading, storage and site handling, installation and commissioning of all equipments and material, complete project maintenance as well as supply and construction related in various, other packages for complete PV plants.
d. Accordingly, the applicant submits, the contract 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 vide generating system to the clients and accordingly the rate of tax applicable is that of 5%.
7.2 The applicant submits further that once the notification itself considers the entire solar power generating system as goods, the service which is 1015% of the contract should 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 COST 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 taxable person for a single price where such supply does not constitute a composite supply.
Illustration.- 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 riot be a mixed supply if these items are supplied separately.”
9. The applicant submits that the tax liability to be discharged in case of composite or mixed supply is provided in Section 8 of CGST Act, 2017 and the same is as under:
Notification No. 1/2017 – Central Tax (Rate) dated 28th June 2017 and Notification No. 11/2017 – Central Tax (Rate) dated 28th June 2017 respectively. In case of goods, as the Notification No. 1/2017 – Central Tax (Rate) dated 28th June 2017, the rate of goods classifiable under 84 or 85 or 94 for solar power generating systems is 5% (2.5% of CGST + 2.5% of SGST) and the relevant entry is provided below:
Comments are closed.