GST on supply of Aluminium Foil Type Winding Inverter Duty Transformer

By Editor2 Goods and Services Tax Judiciary January 20, 2021

TaxGuru Citation: 2021 taxguru.in 800
Case Name: In re Silcher Technologies Ltd. (GST AAR Gujarat)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: AAR/AAAR Gujarat, Advance Rulings

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In re Silcher Technologies Ltd. (GST AAR Gujarat)

Q. Whether supply of Aluminium Foil Type Winding Inverter Duty Transformer classifiable under Chapter Heading 8504 and parts of Transformer supplied / to be supplied for initial setting up of solar project falls under Sr. No. 234 in Schedule-I to Notification No. 01/20017-Central Tax (Rate) dated 28th June, 2017 and liable to Central GST at the rate of 2.5% along with State GST at the rate of 2.5%?

Ans. The applicant is liable for payment of GST on the total value of both the Purchase Order i.e. supply of goods and supply of service in terms of Explanation inserted vide Entry No. 234 of Notification No. 01/20017-Central Tax (Rate) dated 28th June, 2017 vide Notification No. 24/2018-CT (Rate) dated 31.12.2018. Explanation stated that out of the gross value of the supply, 70% shall be deemed to be on account of goods and 30% deemed to be on account of service. Accordingly, the effective rate came to 8.9% as under:

S. No.	Particulars	% of value	Rate of tax	Effective Rate of tax
1.	Goods	70	5%	3.5 %
2.	Services	30	18%	5.4%
Total				8.9%

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT

M/s. Silcher Technologies Ltd., Bil Road, Bil, Vadodara -380022 is a company registered under the provisions of Companies Act and having a GSTIN: 24AADCS3108B1Z2, has filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fee of Rs. 5,000/- each under the CGST Act and the GGST Act.

2. M/s. Silcher Technologies Ltd. is one of India’s prominent manufacturers of Electronics & Telecom and Power & Distribution transformers. The said company was founded in 1990 to manufacture R-core transformers. In 1995, after an overwhelming response from the market, they ventured into the manufacturing of Ferrite transformers. As part of their expansion plans, they started manufacturing Distribution and Power Transformers in a phased manner from 2005 to 2007. The applicant now caters to a wide cross section of industrial segments from utility to renewable energy sector and to individual retail customers across the globe.

3. The applicant submitted that they provide an extensive range of Linear Transformers from R-core to EI and Toroidal to Current transformers. These transformers can be supplied according to customer specific requirement in terms of thermal insulation, cut-offs, static-magnetic shielding, special mounting, epoxy moulding, vacuum impregnation, etc.

4. The applicant submitted that they manufacture Telecom and Data Transformers of highest quality standards to satisfy customer requirements. With engineering support from Custom Magnetics, USA they design the most efficient and cost effective solutions for their customers. All Telecom Transformers are tested for QA both during production and before shipping. Incoming quality control tests are conducted on all raw materials. The quality control department of Applicant is equipped with the latest computerized equipment available. Each shipment is provided with a full quality control report and certificate of compliance (COC). Applicant also manufactures Standard Line transformers for R-core as well as Toroidal Models. Their standard line transformers are available for 9/18V output, 12/24V output and isolation transformers for 115/230V output. The input for all the above transformers is 115 V/230V. The standard line transformers of Applicant meet CSA and CE standards as well as class B insulation system.

5. The Applicant submitted that they have attained expertise in manufacturing Power Transformers in a very short span of time after venturing into the business of Distribution Transformers. The Applicant is capable of manufacturing 25MVA, 66KV Class Power Transformer. The Transformers of Applicant are manufactured under stringent stage wise Quality Checks till dispatch. The state-of-the-art facility accompanied by a team of qualified and experienced professionals adds reliability to each product. The Applicant has an annual manufacturing capacity of 600MVA. All the transformers of Applicant are type tested at NABL certified laboratory. The Applicant had type tested power transformers from 3.15MVA, 33KV Class to 15MVA, 66KV Class.

6. The applicant submitted that with respect to distribution transformers, applicant manufacture transformers in capacities ranging from 5KVA, 1 Phase to 3.5MVA, 33KV and 1000KVA, 11KV Dry Type Transformers. The Power transformers undergo stringent stage wise Quality Checks till dispatch. They have an annual manufacturing capacity of 1425MVA. They have type tested distribution transformers from 5KVA, 1 Phase to 3.5MVA, 33KV Class.

7. Few of the products manufactured by the Applicant are imaged as under:

8. Accordingly, the applicant sought the Advance Ruling on the following question:-

Whether supply of Aluminium Foil Type Winding Inverter Duty Transformer classifiable under Chapter Heading 8504 and parts of Transformer supplied / to be supplied for initial setting up of solar project falls under Sr. No. 234 in Schedule-I toNotification No. 01/20017-Central Tax (Rate) dated 28th June, 2017 and liable to Central GST at the rate of 2.5% along with State GST at the rate of 2.5%?

APPLICANT’S INTERPRETATION OF LAW AND/OR FACTS

9. The applicant submitted that on the basis of actual interpretation of the legal language and well specified norms and Notifications pertaining to the class / category of goods supplied / to be supplied, Applicant submits as under based on the best of the belief and understanding:-

(i) The Applicant has received an Order from M/s. Adani Green Energy Limited (PO: 4500315135 dated 08.11.2019), the copy of which is enclosed herewith for the kind consideration for supply of 25MVA ONAN/ONAF 33/0 8/0 8KV Aluminium Foil Type Winding Inverter Duty Transformers, Mandatory Spares for Transformers which also includes Packing and Forwarding, Freight and Insurance charges up to the Site of the customer.

(ii) The product to be supplied falls under Chapter Heading 8504 to the best belief and understanding of the Applicant as the Applicant since years classifies the product under the said Chapter Heading.

(iii) As per the indemnity / undertaking given by the counter recipient of supply i.e. M/s. Adani Green Energy Private Limited, the recipient of supply is developing and setting up a 75MW Solar Project at Chitrakoot, Uttar Pradesh (UPNEDA Project) for which an approval has been granted to the recipient of supply from the Ministry of New & Renewable Energy.

(iv) For the above initial setting of the Solar Project, the recipient of supply of the applicant require machine, equipment, power cables, transformers and many other parts & components of the solar Power plant, for direct use in its manufacturing and initial setting up. The recipient of supply also confirmed that these Inverter Duty Transformers being procured are parts of Solar Power Generating System and will be used only for the said application.

(v) The Technical specification issued by the recipient of supply for the above contract awarded to the Applicant (Ref: 5353-E-SEP-EES-TE-S-I-002) for Aluminium Winding Inverter Duty Transformers to be procured for 50MW Solar Project at Jalabad, 50MW Solar Project at Sahaswan and 50+25MW i.e 75MW Solar Project at Chitrakoot Uttarpradesh for which the contract has been awarded to the Applicant contains scope of supply and services along with intent of specification at page no. 3 which reads as under:-

“1.0.0 INTENT OF SPECIFICATION:

1.1.0 This Specification Covers Design, Engineering, Manufacture, Assembly and Testing at Works, Packing / Dispatch, Transportation to Site with Transit Insurance, Supervision of Erection, Testing & Commissioning of Inverter Duty Transformers as Specified Complete with All Accessories for Efficient and Trouble Free Operation of Solar Power Plant.

1.1.0 It is not the intent to specify completely herein all details of the design and manufacture. However, the equipment shall conform in all respects to high standards of design engineering and workmanship and shall be capable of performing in continuous commercial operation up to bidder’s guarantee.

1.1.0 The general terms and conditions, instruction to bidders and other attachment referred to elsewhere be hereby made part of the technical specification. The bidder shall be responsible for and governed by all requirements stipulated in the specification.

1.1.0 Deviations if any should be brought out very clearly on deviation sheet enclosed with the specification only. Otherwise it will be construed that the bidder’s offer is in line with what has been stated /asked for in this specification.

1.1.0 The offer should be complete with technical data, catalogue, brochures and drawings as applicable. In order to be able to present the proven-ness of the equipment offered, the bidder is required to elaborate details of experience, capabilities, reference list, etc. in the offer.

2.0.0 SCOPE OF SUPPLY & SERVICES:

2.1.0 The Scope of Supply Shall Cover Design, Engineering, Manufacture, Assembly and Testing at Works, Packing / Dispatch, Transportation to Site with Transit Insurance and Supervision of erection, testing & commissioning of the transformer complete with all fittings and accessories.

2.2.0 The scope of supply shall also include the following.

a) First fill of consumables.

b) Spare parts required for successful commissioning.

c) Mandatory spare parts for three years trouble free operation & maintenance.

O&M spares shall be considered for evaluation of bid. It shall not be binding on the owner to procure all of the O&M spares.

2.3.0 Scope of Services

a) Preparation and submission of drawings & document in soft and hard form as per the drawing/document submission schedule.

b) Supervision of erection, testing & commissioning of transformer.

c) Submission of progress report.

d) Participation in project review /Technical Coordination meetings.

2.4.0 Exclusion

a) Civil works.

b) Fire Fighting Equipments.

c) Receipt, Unloading & Storage

d) Erection, Testing and Commissioning.

2.5.0 Terminal Points

a) HV Bushing for termination in Cable Box.

b) LV Bushing for termination in Cable Box.

c) Transformer Earthing Pads.”

The Copy of the technical specification is enclosed with the application.

10. The applicant submitted that it can be seen from para 2.3.0 above, the services are also included and hence the recipient of supply of service has issued a separate Service Order No. 5700280769 dated 23.12.2019 for supervision of erection, testing and Commissioning charges for the transformer to be supplied / supplied by the Applicant which is enclosed herewith for the kind consideration. The Applicant is going to charge 18% GST on the same being classified as service. At this juncture, it is worth mentioning that actual erection, commissioning and installation is not supposed to be carried out by the applicant as such it shall be required only to supervise the same for which a separate contract as mentioned above has been issued to the Applicant.

11. The Applicant submitted that they believes that the product i.e. Aluminium Foil Type Winding Inverter Duty Transformers along with its parts to be supplied falls under Sr. No. 234 to the Schedule – I to Notification No. 01/2017-Central Tax (Rate) dated 28th June, 2017 read with similar Notification issued under Gujarat GST Act, 2017 as amended from time to time wherein the rate of GST is 2.5% + 2.5%. The said entry for Chapter No. 84 or 85 reads as under:-

“Following renewable energy devices & parts for their manufacture (a) Bio-gas plant (b) Solar power based devices (c) Solar power generating system (d) Wind mills, Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants / devices (f) Solar lantern / solar lamp (g) Ocean waves/tidal waves energy devices/plants”

12. The applicant submitted that after various disputes on the above mentioned entry and divergent decisions of the Honorable Advance Ruling Authorities and Honorable Appellate Authority for Advance Ruling across the Nation with respect to the classification of the contract / supply and applicability of 5% or 18% rate, the Honorable GST Council in its 31st meeting held on 22 December, a much-awaited clarification was recommended in relation to the GST applicable on solar power generating systems and other renewable energy devices. This was implemented vide Notification No. 24/2018-CT (Rate) dated 31.12.2018, which came into force on 31st December 2018, and it added an explanation to entry 234:-

“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 June 2017 the value of supply of goods for the purposes of this entry shall be deemed as 70% of the gross consideration charged for all such supplies, and the remaining 30% of the gross consideration charged shall be deemed as value of the said taxable service.”

13. The applicant submitted that further, a new entry 38 has been added in the Notification No. 11/2017-Central Tax (Rate) pertaining to rate of services vide Notification No. 27/2018-Central Tax (Rate) dated 31st December, 2018 read with similar Notification issued under the provisions of the Gujarat GST Act,2017 which prescribes an 18% GST rate for services under chapter 9954, which pertains to construction services, or 9983, which pertains to other professional, technical and business services (except research, development, legal and accounting services), or 9987, which pertains to “maintenance, repair and installation (except construction) services”, “by way of construction or engineering or installation or other technical services, provided in relation of setting up of” bio-gas plant, solar power generating system, waste-to-energy plants/devices.

14. The applicant submitted that two separate contracts have been issued by the recipient of supply as supply and services have separately been bided by the Applicant as there was not at all a compulsion from the recipient of supply to bid two different contracts as the supply of goods also could have been sufficed and accordingly the explanation as inserted above and reproduced and mentioned herein above shall not be applicable and thus Applicant believes that the supply of Transformers to be executed / should be liable to GST at 2.5% CGST and 2.5% SGST.

15. The applicant submitted that hence, on the basis of all the above explanations and precedence, they are very much hopeful of an Advance decision from the Authorities.

Personal Hearing

16. Personal hearing in the matter was held on 23.12.2020. Authorised representative of the company appeared on behalf of the applicant and reiterated the submission made in the Application.

DISCUSSION & FINDINGS

17. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative. We have also considered the issues involved on which Advance Ruling is sought by the applicant.

18. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the GGST Act.

19. The applicant submitted that they are one of India’s prominent manufacturers of Electronics & Telecom and Power & Distribution transformers. The said company was founded in 1990 to manufacture R-core transformers. As part of their expansion plans, they started manufacturing Distribution and Power Transformers in a phased manner from 2005 to 2007. They now cater to a wide cross section of industrial segments from utility to renewable energy sector and to individual retail customers across the globe. Their standard line transformers are available for 9/18V output, 12/24V output and isolation transformers for 115/230V output. The input for all the above transformers is 115 V/230V. The standard line transformers of Applicant meet CSA and CE standards as well as class B insulation system.

20. The Applicant further submitted that they are capable of manufacturing 25MVA, 66KV Class Power Transformer. The said transformer manufactured under stringent stage wise Quality Checks till dispatch. The state-of-the-art facility accompanied by a team of qualified and experienced professionals adds reliability to each product. They have an annual manufacturing capacity of 600MVA. All the transformers of Applicant are type tested at NABL certified laboratory. They had type tested power transformers from 3.15MVA, 33KV Class to 15MVA, 66KV Class.

21. The Applicant has received an Order from M/s. Adani Green Energy Limited (PO: 4500315135 dated 08.11.2019), for supply of 25MVA ONAN/ONAF 33/0 8/0 8KV Aluminium Foil Type Winding Inverter Duty Transformers, Mandatory Spares for Transformers which also includes Packing and Forwarding, Freight and Insurance charges up to the Site of the customer.

22. In this regard, applicant has submitted an indemnity / undertaking dated 05.02.2020 given by M/s. Adani Green Energy Private Limited i.e. recipient of supply of Aluminium Foil Type Winding Inverter Duty Transformer wherein it is stated that,-

M/s. Adani Green Energy Limited is developing and setting up (75MW Chitrakoot Solar Project. Uttar Pradesh, UPNEDA Project). for which approval from the Ministry of New & Renewable Energy has already been received; that the entire lot to be received from the applicant will be used only in the initial setting of the above project and not elsewhere or not for any other purposes.

23. The applicant submitted that two separate Purchase Orders have been issued by the recipient of supply as supply of goods and services. The applicant has received the order P.O. 4500315135 dated 08.11.2019 of supply of AluminIum Foil Type Winding Inverter Duty Transformer along with their parts. Also received a separate Service Order No. 5700280769 dated 23.12.2019 for supervision of erection, testing and commissioning charges for the transformer to be supplied by the Applicant.

24. The moot question here is to decide whether the supply of said Aluminium Foil Type Winding Inverter Duty Transformer and their parts is eligible for GST rate @ 5% as per the Sr. No. 234 of Notification No. 01/20017-Central Tax (Rate) dated 28th June, 2017 .

25. Under GST regime, various rates have been prescribed for goods and services. Per, Notification No. 01/20017-Central Tax (Rate) dated 28th June, 2017 , solar power generating systems and parts for their manufacture are taxable at 5%. The relevant entry reads as follows :

Schedule-I GST @5%

Sl. No.

Chapter Heading

Description

234

84 or 85 or 94

Following renewable energy devices and parts for their manufacture