Solar HT/LT XLPE Cables for Solar Power Systems qualify for concessional GST rates under Sr. No. 234

AAAR Gujarat ruled that Solar HT/LT XLPE Cables manufactured for Solar Power Generating Systems qualify for concessional GST rates under Sr. No. 234 of Schedule-I to Notification No. 1/2017-IT (Rate). The Authority held that purchase orders constitute valid contracts under Indian Contract Act, 1872, satisfying conditions for exemption. The cables, classified under Chapter 85, form integral parts of Solar Power Generating Systems and are eligible for 5% GST until 30.09.2021, thereafter 12% GST under amended notification provisions.

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Issues Involved:
1. Applicability of concessional GST rate on HT/LT XLPE Cables used in Solar Power Generating Systems.
2. Validity of purchase orders as legal documents for availing GST concessions.
3. Classification of services involved in the supply of cables.

Detailed Analysis:

1. Applicability of Concessional GST Rate:
The primary issue was whether HT/LT XLPE Cables, designed, manufactured, and supplied by the appellant for use in Solar Power Generating Systems, qualify for a concessional GST rate under Sr. No. 234 of Schedule-I to Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017. The appellant argued that their cables fall under Chapter 85, which is covered under the said notification, and therefore, should attract a concessional rate of 5% GST.

The appellate authority examined Entry No. 234, which provides a 5% GST rate for goods under Chapter 84, 85, or 94 used in renewable energy devices, including Solar Power Generating Systems. The authority agreed with the GAAR's observation that the XLPE cables are covered under Chapter Heading 8544 and form an integral part of the Solar Power Generating System. Therefore, the cables meet the criteria for the concessional rate.

2. Validity of Purchase Orders as Legal Documents:
The GAAR had previously ruled that the appellant did not provide sufficient legal documents such as supply contracts or original purchase orders to substantiate their claim for the concessional rate. The appellant contended that they had submitted the original purchase order dated 25.12.2018 and that purchase orders, in general, should be considered valid contracts under the Indian Contract Act, 1872.

The appellate authority referred to Section 10 of the Indian Contract Act, 1872, which states that valid contracts are made by the free consent of competent parties for lawful consideration and with a lawful object. The authority also cited a Board Circular No. 31/2013-Cus dated 6th August 2013, which supports the view that purchase orders meeting these criteria are valid contracts. Consequently, the appellate authority concluded that the purchase orders submitted by the appellant are valid legal documents.

3. Classification of Services Involved:
GAAR had noted a distinct possibility of services being involved along with the supply of goods, which could affect the applicability of the concessional GST rate. The appellant argued that any services mentioned in the purchase order, such as design, engineering, manufacturing, and transportation, are naturally bundled with the principal supply of goods and do not constitute separate taxable services.

The appellate authority reviewed an affidavit from Adani Green Energy Limited, confirming that the appellant supplied only goods and no additional services. The authority agreed that the services listed in the purchase order are essential for making the goods marketable and do not extend beyond the sale of goods. Therefore, these services should not affect the concessional GST rate.

Conclusion:
The appellate authority modified the Advance Ruling No. GUJ/GAAR/R/03/2021, holding that the appellant's Solar HT/LT XLPE Cables are eligible for the concessional GST rate of 5% under Entry No. 234 of Schedule-I to Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017, up to 30.09.2021. From 01.10.2021, the cables will be taxed at 12% GST under Entry No. 201A of Schedule-II to the same notification, as amended.

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