In re Aastha Traders (GST AAR Uttar Pradesh)
Introduction: Understanding the GST rate and HSN code for solar-driven submersible pumps is crucial for businesses like Aastha Traders. In the case of Aastha Traders in Uttar Pradesh, the GST Advance Ruling Authority addressed their queries regarding the tax rate and HSN code for these pumps.
Detailed Analysis:
1. Background of Aastha Traders:
- Aastha Traders, a registered GST dealer, sought an advance ruling on the applicable tax rate and HSN code for solar-driven submersible pumps.
- The applicant aimed to expand its retail business by including submersible pumps designed for domestic and agricultural use, both electric and solar variants.
2. Issues Raised by Aastha Traders: The applicant raised questions about the applicable tax rate and HSN code for solar-driven submersible pumps based on variations observed in the market.
3. Applicant’s Interpretation of Law:
- Aastha Traders argued that solar pumps, designed to draw water using solar power, should be taxed at 18% from July 18, 2022.
- The HSN code for such pumps, according to the applicant, should be determined based on their usage for domestic and agricultural purposes.
4. Technical Specifications and Classification:
- The ruling authority emphasized the need for detailed technical specifications to determine the correct classification.
- Solar panels, controllers, and water pumps were analyzed individually, with different GST rates applied based on their functions and classifications.
5. Composite or Mixed Supply:
- The authority examined whether the supply constituted a composite or mixed supply.
- Aastha Traders proposed a combination of solar panels, controllers, and submersible pumps, but the authority found no principal supply or natural bundling.
6. Rate of GST on Mixed Supply:
- According to Section 8(b) of the GST Act, a mixed supply attracts the highest rate of tax.
- The ruling concluded that the solar-driven submersible water pump is a mixed supply, and the highest GST rate among the supplied goods applies.
Conclusion: In conclusion, Aastha Traders received clarity on the GST rate (18%) for solar-driven submersible pumps and the determination that the supply is a mixed supply. The highest GST rate among the goods supplied by the applicant will be applicable. This ruling provides essential insights for businesses dealing with similar products and highlights the importance of accurate technical specifications for proper classification and tax determination.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTAR PRADESH
1. M/s Aastha Traders (here in after referred to as the applicant) is a registered dealer under GST having GSTIN 09ABBFA4098G1ZD having principal place of business at Shakti Khand-II/164 A-F-l, Indirapuram, Indirapuram, Ghaziabad, Uttar Pradesh, 201001 (Old address at C-2, G-101, Ganpati Villa, Opp. Angel. Mega Mall, Kaushambi, Ghaziabad-201001 (Uttar Pradesh)) and additional place of business at Khasra No. 255. Maharishi Garden, Prakash Nagar, Khora Colony, Ghaziabad (Uttar Pradesh) engaged in the retail business of the all types of cement.
2. The applicant has submitted an application for Advance Ruling dated 30.05.2023 enclosing duly filled Form ARA-01 (the application form for Advance Ruling) along with annexure and attachments. The applicant in his application has sought advance ruling on following question-
1. What is applicable tax rate on sale of solar driven submersible pump (water pump)?
2. What is the HSN code for solar driven submersible pump (water pump)?
3. As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant.
The applicant has submitted that-
1. Astha traders is a partnership firm having three partners Shri Lavish Gupta, Shri Dhananjay Gupta and Shri Anuj Kumar Gupta.
2. They were engaged in the business of trading of all kinds of cements and they now intend to add a new retail segment namely submersible pump primarily used for pumping water for domestic and agricultural purpose. There were two variants of the pump namely electric pump, designed to run on electricity and solar pump designed to run using solar power modules.
3. They intend to start trading of both electric and solar submersible pump and during the course of market research, it was learnt that some dealers were charging GST @ 18% (9% + 9%), whereas some dealers were charging GST @ 12% (6% + 6%) on solar device driven submersible pump. They were also using different HSN code.
4. In view of the above, they have sought Advance ruling for determination of the GST rate applicable to Solar water submersible pump and the HSN code required to be used while issuing invoices.
4. The applicant has submitted their interpretation of law as under-
The Advance Ruling is being sought the GST applicable tax rate w.e.f 18/07/2022 on sale of solar device driven pump primarily designed to powered by solar modules that helps draw surface or ground water out for domestic as well as irrigation which consequently serves the agricultural Purpose.
Further, what is the HSN Code to be used for solar device driven pump primarily designed to powered by solar modules that helps draw surface or ground water out for domestic as well as irrigation which consequently serves the agricultural Purpose.
5. As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant.
6. The application for advance ruling was forwarded to Deputy Commissioner, Central Tax & Central Excise, Division-Ghaziabad-VI vide letters dated 19.06.2023 and dated 24.07.2023 to offer their comments/views/verification repot on the matter. No views/comments have been offered till date.
7. The applicant was granted a personal hearing on 19.07.2023 which was attended by Shri Anand Kumar Verma, the authorized representative of the applicant, through video conference during which he reiterated the submissions made in the application of advance ruling.
DISCUSSION AND FINDING
8. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act 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 same provision under the UPGST Act. Further for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act/UPGST Act would be mentioned as being under the ‘CGST Act’.
9. We have gone through the Form GST ARA-01 filed by the applicant and observed that the applicant has ticked following issues on which advance ruling required-
(1) Classification of any goods or services or both.
(2) Determination of the liability to pay tax on any goods or services or both;
10. We have gone through the submissions made by the applicant and have examined the interpretation submitted by them. At the outset, we find that the issue raised in the application is squarely covered under Section 97(2) (a) of the Central Goods and Services Tax Act, 2017 being a matter related to classification of goods or services or both. We therefore, admit the application for consideration on merits.
11. It is seen from the records, that the applicant intends to start trading in solar driven submersible water pumps. It is necessary to understand the commodity involved before going into the aspect of classification. The applicant was asked to submit the constituents along with specification of their product. They have submitted a flow chart showing the details of the Solar submersible pump and have given the specifications as Solar Panel, Controller and solar submersible pump. They further added that the solar pump only runs on solar heat and not through electricity. They were further asked to provide the detailed technical specification of the product. They however failed to furnish any details regarding the technical specification of the product in question.
11.1 Solar water pumps are powered by solar energy and are used for irrigation, livestock watering, and other water transfer purposes. In order to arrive at the correct classification of the product in question, it is necessary to differentiate between the products, ‘Solar power based devices’ and ‘Submersible pump that can also run using solar power’. If all the devices that can be run using electricity generated by solar power were to be termed as ‘solar power based device’, then all the gadgets like Air Conditioners, Refrigerators or any other electrical appliances used by individuals in then-homes using solar power would be termed as ‘solar power based device’. This however is not the case. Thus, it is essential to determine whether a device can run independently of solar power.
A solar driven water pump includes different components namely,-
i) Solar Panels,
ii) Controller, and
iii) Water Pump.
It is necessary to understand the purpose and classification of each individual component before arriving at the correct classification of the ‘Solar power driven submersible pump’.
11 .2 The Solar Panels are the most critical component of a solar water pump as they convert sunlight into electricity. The panels are typically made of photovoltaic cells that convert sunlight into direct current (DC) electricity. The number and size of the panels required for a solar water pump depend on the amount of water needed to be pumped and the amount of sunlight available. A solar panel converts sunlight into electricity, also known as a photovoltaic panel.
Solar panels i.e Photovoltaic cells assembled in modules or made up into panels are classifiable under Tariff heading 8541 43 00 of the CGST Tariff. There is a specific entry at SI No 234 of Schedule -I of GST Tariff wherein GST has been prescribed @ 6%.
