Classification of goods & services in EPC contract for solar power unit: GST rate ruling

The case involved the classification of goods and services in an EPC contract for a solar power unit in an irrigation system. The applicant sought clarification on the applicable GST rate, arguing for a combined rate of 8.9%. The jurisdictional officer agreed with the classification but highlighted compliance requirements. The authority ruled that the project constituted a works contract resulting in immovable property, categorized as a composite supply of services to the Water Resources Department, attracting a GST rate of 12% (6% CGST and 6% SGST).

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Issues Involved:
1. Classification of goods and/or services or both.
2. Applicable rate of tax on the supply of goods and services involved in the EPC contract on a turnkey basis.

Detailed Analysis:

Classification of Goods and/or Services or Both:
- Applicant's Submission: The applicant, a partnership firm engaged in multidisciplinary projects, sought clarification on the applicable GST rate for an EPC contract involving the construction and installation of a solar power unit for a pressurized irrigation system. They argued that the solar power unit is essential for the irrigation system and should be classified under renewable energy devices.
- Relevant Provisions:
- Section 7 of the CGST Act, 2017 defines "supply" to include all forms of supply of goods or services for consideration.
- Section 2(52) defines "goods" as movable property.
- Section 2(102) defines "services" as anything other than goods.
- Section 9 of the CGST Act, 2017 is the charging section for GST.
- Notification No. 01/2017 - Central Tax (Rate) and Notification No. 11/2017 - Central Tax (Rate) outline GST rates for goods and services, respectively.

Applicable Rate of Tax on the Supply of Goods and Services:
- Applicant's Argument: The applicant contended that the EPC contract should be taxed at 8.9% of the gross consideration, based on the combined application of Entry 234 (for goods) and Entry 38 (for services) of the respective GST rate notifications.
- Goods: Classified under Entry 234, which includes renewable energy devices like solar power-based devices, taxable at 5%.
- Services: Classified under Entry 38, which includes construction and installation services for renewable energy devices, taxable at 18%.
- Combined Rate: 70% of the gross consideration for goods at 5% and 30% for services at 18%, resulting in an effective rate of 8.9%.

Jurisdictional Officer's Comments:
- The officer agreed with the classification but emphasized the need for compliance with GST procedures. They noted that the turnkey nature of the project could affect tax applicability over time.

Authority's Findings:
- Nature of Supply: The supply involves setting up a complete irrigation project, including solar power units, which constitutes a "works contract" under Section 2(119) of the CGST Act, 2017.
- Immovable Property: The project results in immovable property, as it involves land acquisition, civil structures, and equipment installation.
- Composite Supply: Classified as a composite supply of works contract, which is explicitly treated as a supply of services under Schedule II of the CGST Act.
- Applicable Rate: The supply is to the Water Resources Department, a government unit, and falls under S.No. 3(Heading 9954) (iii) of Notification No. 11/2017-CT (Rate), attracting a GST rate of 12% (6% CGST and 6% SGST).

Ruling:
The activities of supply, design, installation, and commissioning of the irrigation project, as per the tender document floated by the Water Resources Department, a unit of the Government of Rajasthan, shall attract GST at 12% (6% CGST and 6% SGST).

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