In re M/s Giriraj Renewables Private Ltd. (AAR Karnataka)
The Applicant is an EPC contractor and enters into contract with various developers who desire to set up and operate solar photovoltaic plants for supply of power generated. The contracts are for supply of goods as well as services. The applicant has sought advance ruling in respect of the following questions:
a) Whether supply of turnkey 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) If Yes, Whether the Principal Supply in such case can be said to be ‘Solar Power Generating System’ which is taxable at 5% GST.
c) Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors.
RULING
1. Question No. 1-The major component (PV Module) said to have been constituting 70% of the whole project can not be construed to be supplied by the applicant consequent upon High Sea Sale of the said product and hence it cannot be construed to be a principal supply of the project and thereby cannot be a composite supply.
2. Question No. 2- The question does not not remain relevant on account of answer to question number 1.
3. Question No. 3- The supply made by sub-contractor need to be viewed as an individual supply and thereby the appropriate rate of GST has to be applied depending on the specific nature of supply.
Also Read AAR Ruling- AAAR modifies ruling on GST on solar power plant Installation
FULL TEXT OF AAR RULING IS AS FOLLOWS:
ORDER UNDER SUB-SECTION (4) OF SECTION 98 OF CENTRAL GOODS AND SERVICE TAX ACT, 2017 AND UNDER SUB-SECTION (4) OF SECTION 98 OF KARNATAKA GOODS AND SERVICES TAX ACT, 2017
1. M/s Giriraj Renewables Private Ltd., (called as the ‘Applicant’ hereinafter), I Floor, CTS 906/B, Shivaji Galli, Basavan Bagewadi, Dist. Vijayapura (Bijapur), Karnataka – 586203, having GSTIN number 29AACCE0525D1Z4, have filed an application for Advance Ruling under Section 97 of CGST Act,2017, KGST Act, 2017 & IGST Act, 2017 read with Rule 104 of CGST Rules 2017 & KGST Rules 2017, in form GST ARA-01. They also enclosed copy of challan for Rs.5,000/- bearing CIN number IBKL17112900071003 dated 16.11.2017.
2. The Applicant is an EPC contractor and enters into contract with various developers who desire to set up and operate solar photovoltaic plants for supply of power generated. The contracts are for supply of goods as well as services. The applicant has sought advance ruling in respect of the following questions:
a) Whether supply of turnkey 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) If Yes, Whether the Principal Supply in such case can be said to be ‘Solar Power Generating System’ which is taxable at 5% GST.
c) Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors.
4. The applicant furnishes, in exhibit II to the application, some facts relevant to the stated activity:
a. The applicant is an EPC contractor & enters into contract with various developers who desire to set up and operate solar photovoltaic plants for supply of power generated. In various cases, the Applicant also is a project developer wherein it is engaged in operation of renewable energy power plant projects.
b. Typically a turnkey contract is entered into by the Applicant to do end to end setting up of a solar power plant which includes supply of various goods (such as modules, structures, inverter transformer 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.
c. Accordingly, the contract entered into by the Applicant, 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.
d. The intent of the contract is 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 lines for transmission of the electricity generated up to the storage or the GRID.
e. There may be a single lump sum price for the entire contract for supply of both goods and services and payment terms may be defined depending on various milestones.
The applicant also provided a diagrammatic illustration of the solar power system.
4. The applicant, in Exhibit III to the application, has furnished their understanding of rate of tax / exigibility in respect of the impugned transaction, on the basis of the following grounds:
4.1. Legal provisions and applicability
4.1.1 Rate of solar power generating system
Under GST regime, various rates have been prescribed for goods and services. Per, Notification No. 1/2017 — Integrated tax (Rate) dated 28 Jun 2017, solar power generating systems and parts for their manufacture are taxable at 5%. The relevant entry reads as follows:
