PV DC cables for solar systems classified as electric conductors under Entry 395, not SPGS parts under Entry 234

The AAR Maharashtra ruled that PV DC cables manufactured by the applicant company for solar power systems cannot be classified as parts of Solar Power Generating Systems (SPGS) under Entry 234 of Schedule I (2.5% CGST rate). The cables merely transfer electrical energy from SPGS to inverters without participating in power generation. The AAR held these cables fall under Entry 395 of Schedule III (9% CGST rate) as insulated electric conductors under tariff heading 85.44, applicable from 14.11.2017 when the notification was amended to include such cables.

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Issues Involved:
1. Classification of PV DC Cables under the appropriate GST tariff entry.
2. Determination of applicable GST rate for PV DC Cables.

Comprehensive, Issue-wise Detailed Analysis:

1. Classification of PV DC Cables under the appropriate GST tariff entry:

Applicant's Argument:
- The applicant, M/s Leoni Cable Solutions (India) Pvt Ltd, manufactures and supplies solar cables known as photo-voltaic DC cables (PVDC cables).
- These cables are made from copper conductor with Cross-linked Polyolefin (XLPO) insulation and are used between solar modules and inverters in a photovoltaic system.
- The applicant contends that these cables should be classified under Entry number 234 of Schedule I of Notification No. 1/2017- Central Tax (Rate) (as amended) dated 28 June 2017, which covers renewable energy devices and parts for their manufacture, thereby attracting a lower GST rate of 5% (2.5% CGST and 2.5% SGST).

Authority's Observations:
- The cables are classified under Chapter Heading 8544 of the Customs Tariff Act (CTA).
- The specific question is whether these cables can be considered as parts of the Solar Power Generating System (SPGS) and thus be covered under Entry No. 234.
- The authority noted that the cables are used to carry electricity from the SPGS to the inverters and not directly involved in the generation of solar power.
- The cables do not form an integral part of the SPGS itself but are used for the transmission of electricity generated by the SPGS to inverters.
- The authority concluded that the cables cannot be considered as parts of the SPGS and thus cannot be classified under Entry No. 234.

Conclusion:
- The PV DC Cables cannot be classified under Entry No. 234 of Schedule I of Notification No. 1/2017- Central Tax (Rate) as they are not parts of the SPGS.

2. Determination of applicable GST rate for PV DC Cables:

Applicant's Argument:
- The applicant also identified Entry number 395 of Schedule III of Notification No. 1/2017- Central Tax (Rate) (as amended) dated 28 June 2017, which covers insulated (including enamelled or anodised) wire, cable, and other insulated electric conductors.
- The applicant argued that the PV DC cables should be classified under Entry No. 234 as it is more specific to renewable energy devices, while Entry No. 395 is more generic.

Authority's Observations:
- The authority examined the description of goods under Sr. No. 395 of Schedule III, which includes insulated (including enamelled or anodised) wire, cable, and other insulated electric conductors.
- It was noted that the description of goods under Sr. No. 395 exactly matches the tariff entry 8544, indicating the intention of the government to classify the impugned goods under this entry.
- The authority confirmed that the PV DC Cables fall under Sr. No. 395 of Schedule III, attracting a GST rate of 18% (9% CGST and 9% SGST).

Conclusion:
- The PV DC Cables manufactured and supplied by Leoni Cable Solutions (India) Pvt Ltd are classified under Entry number 395 of Schedule III of Notification No. 1/2017- Central Tax (Rate) (as amended) dated 28 June 2017, liable to GST at 18%.

Order:
Final Decision:
- The PV DC Cables manufactured and supplied by Leoni Cable Solutions (India) Pvt Ltd to its customers will be classified under Entry number 395 of Schedule III of Notification No. 1/2017- Central Tax (Rate) (as amended) dated 28 June 2017, liable to CGST at 9% and SGST at 9%, totaling 18% GST.

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