ABB India Limited Vs Joint Commissioner (Karnataka High Court)
Conclusion: Solar inverters supplied for solar power projects were eligible for the concessional Goods and Services Tax (GST) rate of 5% as solar inverters constituted an integral component of a solar power-generating system and therefore qualified for the concessional tax rate.
Held: Assessee-company was engaged in manufacture and supply of solar inverters, challenged the levy of GST at 18% by the revenue authorities treating the goods as “general electrical devices” under Chapter Heading 8504. Assessee contended that the solar inverters supplied were specifically designed for and used as integral components of solar power generating systems and thus eligible for concessional GST at 5% under Entry 234 of Notification No. 1/2017-CT (Rate) dated 28.06.2017. It was held that solar inverters, which convert DC power generated from solar panels into AC power, were essential and integral parts of a solar power generating system. The expression “solar power generating system” included a combination of components functioning together, and therefore extends to parts used in its manufacture. The benefit of concessional GST rate at 5% under Entry 234 was not restricted to supply of the entire system but also covered supply of parts intended for use in such systems. The requirement under the notification was satisfied where the goods were intended for use in solar power systems; actual end-use need not be conclusively established. Documentary evidence such as purchase orders and invoices demonstrating supply for solar projects was sufficient. The classification adopted by the revenue authorities as general electrical devices ignoring the functional and intended use of the goods was erroneous. Circular relied upon by the department did not override the statutory notification. Also, the tax department put reliance on GST Circular No. 163/19/2021, which specifieed that only goods designed as parts of solar power generating systems qualify for concessional GST. HC said that the circular dealt with valuation issues under EPC contracts and did not change the eligibility of concessional GST rates for renewable energy components. It was concluded by the Karnataka High Court that solar inverters supplied for solar projects were integral parts of solar power-generating systems. Under Entry 234 of Notification No. 1/2017-CT(R), the supplies must be levied with 5% GST. The tax authorities had made a mistake in categorising them as general electrical devices taxable at 18%.The Court furnished a chance to the company to pursue statutory appeals before the appellate authority or tribunal concerning other unresolved matters.
