Appellate Authority: Solar Power Plant Contract = Works Contract Taxable at 18%

The appellate authority concluded that the contract for setting up a solar power plant is a composite supply but qualifies as a works contract, taxable at 18%. The determination of the principal supply was unnecessary as the contract was treated as a works contract. The issue of applying a concessional rate to sub-contractors was not addressed due to insufficient documentation.

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Issues Involved:
1. Condonation of Delay
2. Whether the contract for supply/construction of a solar power plant is a composite supply or a works contract
3. Principal Supply determination and applicable GST rate
4. Applicability of concessional rate to sub-contractors

Condonation of Delay:
The appellant filed the appeal within one month of the formation of the Appellate Authority in Maharashtra, which was constituted on 10.05.2018. The delay was condoned because the appellant had filed letters within 30 days of the advance ruling communication.

Issue 1: Composite Supply vs. Works Contract:
The appellant argued that the contract for setting up a solar power plant should be treated as a composite supply under Section 2(30) of the CGST Act, 2017, with the principal supply being the solar power generating system (SPGS), taxable at 5%. The contract involves the supply of goods and services, including design, engineering, procurement, installation, and commissioning of the solar power plant.

The Authority for Advance Ruling (AAR) had previously ruled that the contract is a works contract, which is treated as a supply of services under Schedule II of the CGST Act, taxable at 18%. The appellant contended that the SPGS is movable and not an immovable property, hence should not be classified as a works contract.

Findings:
The appellate authority analyzed the contract and concluded that it is indeed a composite supply as it involves naturally bundled goods and services supplied in conjunction with each other. However, the authority also agreed with the AAR that the contract results in the erection of an immovable property, thus qualifying as a works contract under Section 2(119) of the CGST Act. The authority cited various judicial precedents and the nature of the project, which includes significant groundwork, soil testing, and construction, indicating an inherent element of permanency.

Issue 2: Principal Supply and GST Rate:
Since the contract is classified as a works contract, it is treated as a supply of services under Schedule II of the CGST Act. Therefore, the question of determining the principal supply does not arise, and the entire contract is taxable at 18%.

Issue 3: Concessional Rate for Sub-Contractors:
The AAR had not dealt with this question due to the absence of documents. The appellate authority also refrained from addressing this issue in the absence of relevant documents.

Conclusion:
1. The contract for setting up a solar power plant is a composite supply but falls under the definition of a works contract, taxable at 18%.
2. The question of principal supply does not arise as the contract is treated as a works contract.
3. The applicability of the concessional rate to sub-contractors was not addressed due to the lack of documents.

Order:
1. The EPC contract is a composite supply under Section 2(30) of the CGST Act, 2017, but it falls within the definition of works contract under Section 2(119) of the CGST Act, 2017.
2. The contract is taxable as a supply of services at 18%.
3. The issue of concessional rate for sub-contractors was not addressed due to the lack of documents.

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