Solar water pumping system components attract different GST rates but complete installation service taxed at 18%

The AAR held that individual components of a solar water pumping system attract different GST rates: solar panels and pumps at 5% under entry 234 as solar power devices, while controllers and structures attract 18% GST. When supplied as a complete system with installation, commissioning and maintenance, the entire supply constitutes a works contract service under Section 2(119) of CGST Act 2017, attracting 18% GST under notification 11/2017. The ruling clarified that mixed supplies attract the highest applicable rate among constituent goods.

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Issues Involved:
1. Classification and GST rate on sale of individual components and combinations of solar water pumping systems.
2. Classification and GST rate on supply and installation of solar water pumping systems for drinking water applications.

Detailed Analysis:

Issue 1: Classification and GST Rate on Sale of Individual Components and Combinations of Solar Water Pumping Systems

Solar Panels:
- Classification: Solar panels are classified under Heading 8541.
- GST Rate: Under SI. No. 234 of GST Tariff, solar panels are taxable at 5%.

Solar Pump:
- Function: Used to extract water using solar energy, designed with low voltage capacity.
- Classification: Classified under Chapter 84.
- GST Rate: Solar pumps are considered solar power-based devices and are taxable at 5% under SI. No. 234 of Notification No. 01/2017-CT(Rate).

Controller:
- Function: Converts DC voltage of the SPV array into suitable DC or AC power.
- Classification: Falls under Chapter 85, HSN code 8504.
- GST Rate: Controllers attract 18% GST.

Structure:
- Function: Used for mounting PV modules in a solar water pumping system.
- Classification: Falls under Chapter 73, HSN code 7308.
- GST Rate: Structures attract 18% GST.

Combinations:
- Solar Water Pumping System (comprising Solar Panel + Controller + Solar Pump + Structure):
- Classification: Considered a mixed supply.
- GST Rate: Highest rate among the individual components applies, which is 18%.

- Other Combinations (Solar Panel + Controller + Solar Pump, Solar Pump + Solar Panel, Solar Pump + Controller, Solar Panel + Controller):
- Classification: Also considered mixed supplies.
- GST Rate: Highest rate among the individual components applies, which is 18%.

Issue 2: Classification and GST Rate on Supply and Installation of Solar Water Pumping Systems for Drinking Water Applications

- Scope: Includes supply, installation, commissioning, and maintenance of solar water pumping systems.
- Classification: Falls under the ambit of works contract service as per Section 2(119) of CGST Act, 2017.
- GST Rate: Attracts 18% GST under S. No. 3 of Heading 9954 (ii) of Notification No. 11/2017 dated 28.06.2017.

Conclusion:
1. Individual Components:
- Solar Pump: 5% GST.
- Controller: 18% GST.
- Structure: 18% GST.
- Solar Panels: 5% GST.

2. Combinations:
- Mixed Supply: Highest rate of GST among the components, which is 18%.

3. Supply and Installation of Solar Water Pumping Systems:
- Classification: Works contract service.
- GST Rate: 18%.

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