Specially designed transformers for wind generators taxed at 9% CGST, not concessional WOEG rates

AAR Gujarat ruled that specially designed transformers for wind operated electricity generators (WOEG) are not part of WOEG itself. The transformers connect WOEG to distribution networks and are installed on ground beside WOEG, not within nacelle or tower. WOEG can generate electricity independently through wind kinetic energy. The notification specifies "WOEG" not "WOEG system," thus transformers cannot be classified under the concessional rate applicable to WOEG. Transformers supplied on principal-to-principal basis are liable to CGST at 9% under Schedule-III, not the concessional rates of 2.5%/6% applicable to WOEG components.

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Issues Involved:
1. Whether the specially designed transformers for Wind Operated Electricity Generators (WOEG) are considered as part of WOEG.
2. Determination of the applicable GST rate on these transformers.

Issue-wise Detailed Analysis:

A. Whether Transformers are Part of WOEG:

36. The judgment refers to Sr. No. 234 of Schedule I of Notification 1/2017-CT (Rate) dated 28-6-17, and Sr. No. 201A of Schedule II of said Notification. The key difference noted is the change from "solar power generating system" to "solar power generator," indicating a narrower scope.

37-38.1. The term "solar power generating system" includes more devices than just the generator itself, as clarified by the Madhya Pradesh High Court in Belectric Photovoltaic India Pvt. Ltd. (2019 (21) GSTL 319 (MP)). This case emphasized that a system includes all components necessary for its function.

38.2-38.3. The judgment stresses strict interpretation of notification wording. WOEG is identified as a generator, distinct from a wind power project or system that might include transformers.

38.4-38.5. The Ministry of New and Renewable Energy's clarification and CBEC Instruction dated 7-12-2015 both do not list transformers as parts of WOEG.

38.6-38.7. The IEC standard for transformers used in wind turbine applications indicates that transformers connect the WOEG to the distribution network but do not constitute an integral part of the WOEG itself.

38.8. WOEG is capable of generating electricity independently. The transformer, although essential for linking generated electricity to the grid, does not alter the WOEG's status as a generator.

B. Determination of GST Rate on Transformers:

39-39.1. Suzlon clarified that the transformers are supplied directly by Suzlon Vadodara to the customers, not through any subcontract with Suzlon Daman. The invoices support this direct supply.

40. The transformers are supplied directly to recipients, indicating a principal-to-principal transaction without any tripartite agreement involving Suzlon Daman.

41. The judgment aligns with CBEC Circular No. 1008/15/2015-CX dated 20-10-2015 and CBEC Instruction dated 7-12-2015, which do not classify transformers as parts of WOEG.

42. The cited case laws, including Rakhoh Enterprises, Elecon Engineering, and SKF Technologies, do not directly address the issue at hand under the GST law. The judgment emphasizes the need for specific analysis under the GST framework, distinct from other tax laws.

43. Based on the detailed analysis, the judgment concludes that transformers are not part of WOEG and are subject to a GST rate of 9% as per Sr. No. 375 of Schedule-III of Notification No. 1/2017-CT (Rate) dated 28-6-2017.

RULING:
Transformers are not part of WOEG and are leviable to CGST @ 9% vide Sr. No. 375 of Schedule-III of Notification No. 1/2017-CT (Rate) dated 28-6-2017.

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