Appellate Authority reclassifies solar water pumping systems as goods and services, GST rate reduced.

The Appellate Authority determined that the activities involving the supply, design, installation, commissioning, and testing of solar energy-based water pumping systems should be classified as both supply of goods and services. The applicable GST rate was reduced to 8.9% based on specific notifications, contrary to the initial ruling by the Rajasthan Authority for Advance Ruling (AAR) which had set the rate at 12%. The appeal was disposed of in favor of the Appellant, modifying the AAR's decision.

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Issues Involved:
1. Classification of the activity as supply of goods or services.
2. Applicable rate of GST on the activity.
3. Consideration of amendments in relevant notifications.

Issue-wise Detailed Analysis:

1. Classification of the Activity as Supply of Goods or Services:

The Appellant, a proprietor of a construction firm, was involved in a tender for designing, supplying, installing, commissioning, and maintaining solar energy-based water pumping systems. The Rajasthan Authority for Advance Ruling (AAR) classified these activities as a "Works Contract of Composite Supply," which was proposed to be undertaken for a government department. The AAR determined that the activity fell under Entry No. 3(iii) with HSN code 99544, attracting a GST rate of 12% (CGST @ 6% and SGST @ 6%).

2. Applicable Rate of GST on the Activity:

The Appellant contested the AAR's ruling, arguing that the rate of 12% GST was incorrect. They pointed out that the AAR did not consider the amendments made by Notification No. 24/2018-Central Tax (Rate) and Notification No. 27/2018-Central Tax (Rate), both dated 31.12.2018. These notifications amended the existing Notification No. 01/2017-Central Tax (Rate) and Notification No. 11/2017-Central Tax (Rate), respectively. The amendments specified that the value of supply of goods should be deemed as 70% of the gross consideration, and the remaining 30% should be deemed as the value of taxable services. This effectively reduced the GST rate to 8.9% (5% on goods and 18% on services).

3. Consideration of Amendments in Relevant Notifications:

The Appellate Authority carefully analyzed the notifications and found that the solar energy-based water pumping systems qualified under entry No. 234 of Notification No. 01/2017-Central Tax (Rate) as "Solar Power based devices." The Authority noted that the Appellant's activities included the supply of other goods and services, such as the installation and commissioning of the system, which were taxable services specified in entry No. 38 of Notification No. 11/2017-Central Tax (Rate). Thus, the conditions for availing the benefit of the amended entries were fulfilled.

Conclusion:

The Appellate Authority concluded that the activities of supply, design, installation, commissioning, and testing of solar energy-based water pumping systems, whose time of supply falls after 31.12.2018, should be classified as both supply of goods and supply of services. The applicable GST rate would be as prescribed under entry No. 234, read with entry No. 38 of the relevant notifications, effectively reducing the GST rate to 8.9%. The ruling by the Rajasthan AAR was modified accordingly, and the appeal was disposed of in these terms.

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