In re Solai Redirect India LLP (GST AAR Rajasthan)
Whether EPC contract for set up of solar power generating system be considered as a composite supply with PV modules being the principal supply and be taxed at a rate of 5% (i.e. tax rate applicable on the P.V. modules)?
As per the statement of facts submitted by the applicant, the scope of work in respect of “Turnkey Composite EPC Contract” includes designing, planning civil works, procurement of good, erection, testing and commissioning. Accordingly, “Turnkey EPC Contract” is not covered under Entry 234 of Schedule 1 of the Notification no. 1/2017 – Integrated Tax (Rate), Entry 234 of Schedule 1 of the Notification no. 1/2017 – Central Tax (Rate) both dated 28 June, 2017 and Entry 234 of Schedule I of the Notification no 1/2017 – State Tax (Rate) dated 29 June, 2017. The contract for Erection, Procurement and Commissioning of Solar Power Plant falls under the ambit “ Works Contract Services” ( SAC 9954 ) of Notification 11/2017 Central Tax (Rate) dated 28 June, 2017 and attracts 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,
Note: Under Section 100 of the CGST/RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Riding constituted under section 99 of CGST/RGST Act 2017, within a period of 30 days from the date of service of this order.
The Issue raised by the applicant is fit to pronounce advance ruling as it falls under ambit of the Section 97(2) (a), it is given as under:
(a) Classification of any goods or services or both;
Further, M/s Solairedirect India LLP the applicant being a registered person, GSTIN is 08ADEFS5194G1ZR, as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the application is ‘admitted’ to pronounce advance ruling.
1. SUBMISSION OF THE APPLICANT:
1.1 Solairedirect India LLP undertakes Engineering, Procurement and Construction (‘EPC’) activities for Group companies as well as third parties for setup of solar power generating system where contract for commissioning of solar power generating system involves simultaneous supply of goods and services.
1.2 The solar power generating system installed by the Applicant under the EPC contracts consists of various components like solar photovoltaic panels , solar inverters, transformers, module mounting structure, cables, connectors and other accessories where solar panels which account for approximately 70% to 75% of the total cost.
1.3 In a typical contract, the customers of the applicant acquire the land for the set-up of the solar power generating system and access is granted to the Applicant for executing the project on turnkey basis.
1.4 The steps involved in execution of a contract by the Applicant are as below:
1.4.1 Planning for the project
The Applicant submits the Implementation schedule which is approved by the purchaser. The Applicant remains responsible for ensuring compliance with the documentation, related drawings, data sheets, technical specifications, measurements w-hile discharging obligations under the contract.
1.4.2 Procurement of materials
The solar panels and other ancillary materials are then procured by the Applicant and delivered to the power generating system’s site. The risk of loss for all equipment and material is transferred to the purchaser on delivery at the project site.
1.4.3 Civil works at the site
Post receiving the access to the project site, applicant starts with the civil works which involves creating of foundations for erection of the solar panels.
1.4.4 Erection, commissioning and installation of the solar panels
Post completion of the foundations, the solar panels is erected on these foundations. Post erection of the solar panels, other related equipment like inverters, wiring and other connections are completed.
1.4.5 Project management services
While executing a contract, the Applicant is also expected to undertake the Project Management services, which typically includes:
