Solar water pumping systems with installation classified as composite supply under Section 2(30) CGST Act 2017

The AAAR-Rajasthan ruled on GST classification for solar water pumping systems. The authority determined that supply of complete solar water pumping systems with installation constitutes composite supply under Section 2(30) CGST Act, 2017, not mixed supply. The system qualifies as solar power-based device under entry 234 of Notification 01/2017. GST rate applicable: 8.9% effective rate until 30.09.2021 (5% on goods at 70% value, 18% on services at 30% value), increased thereafter due to goods rate rising from 5% to 12% post-30.09.2021 amendments.

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Issues Involved
1. Classification and GST rate on solar energy products and their combinations.
2. Classification and GST rate on the supply of a complete solar water pumping system along with installation.
3. Classification of controllers and structures and their applicable GST rates.
4. Determination of whether the supply of various combinations of solar products constitutes a composite or mixed supply.

Detailed Analysis

1. Classification and GST Rate on Solar Energy Products and Their Combinations
The appellant sought an advance ruling on the classification and GST rate for various solar energy products and their combinations. The Authority for Advance Ruling (AAR) held:
- Solar Panels: Taxable at 5% GST under S. No. 234 of Schedule-I of GST Tariff.
- Solar Pump: Classified under S. No. 234 of Notification No. 01/2017-CT (Rate) and taxable at 5% GST.
- Controller: Classified under Chapter 85 of GST Tariff, attracting 18% GST.
- Structure: Classified under Chapter 7308, attracting 18% GST.
- Solar Water Pumping System: Considered a mixed supply of goods and services, attracting the highest GST rate among the supplied goods.
- Various Combinations of Solar Products: Also considered mixed supplies, attracting the highest GST rate among the supplied goods.
- Supply of Solar Water Pumping System with Installation: Classified as a works contract service, attracting 18% GST under S. No. 3 of Heading 9954 of Notification No. 11/2017.

2. Classification and GST Rate on the Supply of a Complete Solar Water Pumping System Along with Installation
The appellant contested the classification of the supply of a solar water pumping system with installation as a works contract service, arguing that it should be considered a composite supply of goods and services with a split GST rate of 70% for goods and 30% for services. The appellate authority agreed with the appellant, referencing the relevant notifications and previous rulings, and concluded:
- Supply of Solar Water Pumping System with Installation: Should be taxed at 5% GST on 70% of the gross consideration for goods and 18% GST on 30% of the gross consideration for services, resulting in an effective GST rate of 8.9%. Post-30.09.2021, the effective rate increased due to amendments, making it 13.8%.

3. Classification of Controllers and Structures and Their Applicable GST Rates
The appellant argued that controllers and structures should be classified as parts of solar water pumping systems, attracting a lower GST rate. The appellate authority upheld the AAR's decision:
- Controllers: Classified under Chapter 85, attracting 18% GST. The authority noted that controllers are electrical devices suitable for multiple uses and not limited to solar applications.
- Structures: Classified under Chapter 7308 (for iron or steel) or 7610 (for aluminum), attracting 18% GST. The authority emphasized that structures are designed according to specifications for intended use but remain classified as structures under their respective headings.

4. Determination of Whether the Supply of Various Combinations of Solar Products Constitutes a Composite or Mixed Supply
The appellant argued that the supply of various combinations of solar products should be considered composite supplies. The appellate authority examined the definitions of composite and mixed supplies under the CGST Act, 2017, and concluded:
- Combinations of Solar Products: Classified as mixed supplies since they do not meet the criteria for composite supplies, such as natural bundling and the presence of a principal supply. Therefore, the highest GST rate applicable to any of the goods in the combination will apply.

Conclusion
The appellate authority upheld the AAR's ruling on the classification and GST rates for solar panels, pumps, controllers, and structures. It also agreed with the AAR that combinations of solar products constitute mixed supplies, attracting the highest GST rate among the supplied goods. However, the appellate authority modified the ruling regarding the supply of a complete solar water pumping system with installation, aligning it with the relevant notifications and previous rulings, resulting in a split GST rate for goods and services.

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