GST on Design, Supply, Installation & Commissioning (DSIC) of Solar Power Plant

The issue concerns GST valuation and rate applicability for solar power projects executed under DSIC (Design, Supply, Installation and Commissioning) contracts, which involve a single bundled contract covering goods and services. Solar power generating systems and related renewable energy devices are taxable at 5% GST under Notification No. 9/2025–Central Tax (Rate). Where such goods are supplied along with construction, engineering, installation or other technical services for setting up a solar power system, a specific deemed valuation mechanism applies. As per the statutory explanation read with Serial No. 38 of Notification No. 11/2017–Central Tax (Rate), 70% of the gross consideration is mandatorily treated as the value of goods and taxed at the applicable renewable energy GST rate, while the remaining 30% is deemed to be the value of taxable services and taxed at the applicable service rate. This legal fiction overrides general composite supply principles and applies irrespective of actual cost break-ups or contractual invoicing structures.

1. Background and Scope

Solar Power Generation panel is being very commonly being supplied under the DSIC contract, which is a single contract for designing, supplying, installation and commissioning of solar power plants. Goods and Services Tax (GST) is applicable separately on the goods portion and service portion in the contract.

The scope of work under such contracts typically includes:

• Design and engineering
• Supply of solar modules, other panels, inverters, mounting structures and related equipment
• Installation, erection, testing and commissioning.

2. Determination of Value of supply

• GST Rate on Supply of Solar power generating System
  • Section 9 of Central Goods and Services Tax Act, 2017 levies tax (i.e., CGST) at the rate notified by the government.
  • Notification No. 9/2025-Central Tax (Rate), notify the rate of Goods at which the tax shall be levied. Goods specified under Schedule I of the said notification are taxable at the rate of 5% (i.e., 2.5% CGST + 2.5% SGST, or 5% IGST).
  • Entry serial number 437 of said schedule specify the rate on the supply of Solar Power generators, accordingly the said supply of leviable to GST at the rate of 5%.
  • The relevant extracts of notification are as follows:

(Emphasis added)

• GST Rate on Supply of Solar power generating system along with the service by way of construction or engineering or installation or other technical services:
  • The notified renewable energy goods (mentioned in point no. 3.1.4. above ) include, inter alia
    • Solar power–based device
    • Solar power generator
    • Photo voltaic cells, whether or not assembled in modules or made up into panels
  • An Explanation to the relevant entry provides that where such goods are supplied along with other goods and services, one of which is a taxable service specified under Serial No. 38 of Notification No. 11/2017-Central Tax (Rate), dated 28 June 2017, the value of supply shall be deemed as follows:
    • 70% of the gross consideration as value of goods; and
    • 30% of the gross consideration as value of taxable services.
  • The expression given in the said entry creates a legal fiction on valuation of supply of goods and services where a gross consideration is charged for the supply of solar power generating system along with the other services referenced therein.
  • The explanation has refereed to entry sr. no. 38 in the notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017, which is specify the GST Rate on Supply of Service by way of construction or engineering or installation or other technical services.
  • The relevant extracts of notification are as follows:

Emphasis added)

• • Explanation to entry sr. no. 38 also referred to services in relation to setting up of solar power generating system.

• Taxable Services for Solar Power Projects
  • Serial No. 38 of Notification No. 11/2017-Central Tax (Rate) covers:
    • Services by way of construction, engineering, installation or other technical services provided in relation to setting up of:
    • Solar power–based devices
    • Solar power generating system
  • The said entry is to be read in conjunction with Serial No. 437 of Schedule I of Notification No. 9/2025-Central Tax (Rate).

• Taxability
  • Nature of Supply
    • The DSIC contract involves:
      • Supply of notified renewable energy goods; and
      • Provision of installation, engineering and commissioning services.
    • Although such supplies are naturally bundled, the GST law has prescribed a specific deemed valuation mechanism for renewable energy projects, which overrides the general composite supply valuation principles.
  • Valuation Mechanism
    • Once the conditions specified in the Explanation are fulfilled, the 70:30 deemed valuation mechanism becomes mandatory, irrespective of:
    • The actual break-up of costs, or
    • Whether separate values are mentioned in the contract or invoice.

3. GST Rate Applicability