Solar inverter, controller, battery and panels form composite supply under Solar Power Generating System attracting 5% GST per Notification 01/2017

AAR Uttarakhand ruled that supply of solar inverter, controller, battery and panels constitutes a composite supply under Solar Power Generating System when supplied for power generation purpose. The entire supply attracts 5% GST (2.5% CGST + 2.5% SGST) as per Notification No. 01/2017-Central Tax (Rate) serial no. 234. The ruling applies to both manufacturers and traders, treating the system as predominant element in composite supply rather than mixed supply with individual component taxation.

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Issues Involved:
1. Applicability of GST rate on supply of solar inverter, controller, battery, and panels under "Solar Power Generating System" and whether such supply is a 'composite supply' or 'mixed supply'.
2. Whether the supply of solar inverter and solar panels together falls under the definition of "Solar Power Generating System" or constitutes a 'mixed supply' and the applicable GST rate.
3. Significance of being a manufacturer or trader on the clarification.

Issue-wise Detailed Analysis:

Issue 1: Applicability of GST rate on supply of solar inverter, controller, battery, and panels under "Solar Power Generating System" and whether such supply is a 'composite supply' or 'mixed supply'.

The applicant sought an advance ruling on the classification and GST rate applicable to the supply of solar inverter, controller, battery, and panels. According to Section 97(2)(a) & (e) of the CGST/SGST Act, 2017, the application is admissible. The Joint Commissioner, SGST, Roorkee, clarified that if these items are supplied in an assembled form, they are covered under "Solar Power Generating System" and are not treated as composite supply. The applicable GST rate for "Solar Power Generating System" is 5% (2.5% CGST + 2.5% SGST). However, if supplied individually, they are considered a mixed supply with an 18% GST rate.

The judgment examined various components of a solar power generating system, including solar panels, inverters, controllers, and batteries. It concluded that when these items are supplied for the specified purpose of generating solar power, they are covered under "Solar Power Generating System" and treated as a composite supply. The applicable GST rate for such a supply is 5%, as per serial no. 234 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.

Issue 2: Whether the supply of solar inverter and solar panels together falls under the definition of "Solar Power Generating System" or constitutes a 'mixed supply' and the applicable GST rate.

The ruling referenced past judicial pronouncements and notifications from the erstwhile Central Excise regime, which supported the classification of solar inverters and panels as part of the "Solar Power Generating System." The supply of solar inverter and solar panels together, when used for generating power from sunlight, falls under the definition of "Solar Power Generating System." This supply is treated as a composite supply with a GST rate of 5% (2.5% CGST + 2.5% SGST), as per serial no. 234 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.

Issue 3: Significance of being a manufacturer or trader on the clarification.

The ruling clarified that the GST rate does not change based on whether the supplier is a manufacturer or a trader. The same GST rate and classification apply to both manufacturers and traders engaged in the supply of solar inverters, controllers, batteries, and panels for solar power generating systems.

Order:

1. Supply of solar inverter, controller, battery, and panels is covered under "Solar Power Generating System" as a whole, with a GST rate of 5% (2.5% CGST + 2.5% SGST), and such supply is treated as a composite supply.
2. Supply of solar inverter and solar panels together falls under the definition of "Solar Power Generating System" with a GST rate of 5% (2.5% CGST + 2.5% SGST), and such supply is treated as a composite supply.
3. The aforesaid findings apply to both manufacturers and traders engaged in the said supply.

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