Solar inverters and batteries for solar power plants classified under entry 234 with 12% GST rate

AAR Haryana ruled that solar inverters manufactured by the applicant fall under entry 234 of Schedule-I of Notification 1/2017-Central Tax (Rate). Solar batteries sold to manufacturers/traders for use in solar power plants qualify as parts of solar power plants under the same entry. Solar inverters packaged with solar batteries and panels together also fall under entry 234. The authority determined that solar power generating systems convert sunlight to electricity, consisting of modules, inverters, and sometimes battery storage. GST rate for solar power generating system equipment (composite supply) is 12% for 70% of plant cost, while installation and engineering services attract 18% GST on remaining 30%.

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Issues Involved:
1. Applicant's eligibility for seeking an advance ruling.
2. Classification of solar inverter under GST.
3. Classification of solar batteries under GST.
4. Classification of the composite supply of solar inverter, solar battery, and solar panel under GST.

Issue-wise Detailed Analysis:

1. Applicant's Eligibility for Seeking an Advance Ruling:
The applicant must meet the conditions under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (HGST Act, 2017). Sections 97(2) (a)(b) & (c) read with Section 95 of the CGST Act, 2017 allow seeking an Advance Ruling on classification of goods/services, applicability of a notification, determination of tax liability, and whether a particular activity amounts to a supply. The applicant's issue is neither pending nor decided in any proceeding under the CGST/HGST Act, 2017, making them eligible for an Advance Ruling.

2. Classification of Solar Inverter under GST:
The applicant manufactures solar inverters, which convert the DC output of solar panels into AC. The applicant argues that solar inverters fall under entry no. 234 of Schedule I of Notification 1/2017 - Central tax (rate) dated 28.06.2017, which covers renewable energy devices. The Authority agreed, referencing cases like COMMISSIONER OF CUSTOMS, COCHIN VS. SOLGEN ENERGY PVT. LTD. and Bhel v. CCE, where solar inverters were classified as solar power generating systems. Thus, solar inverters qualify under entry no. 234, attracting a GST rate of 12%.

3. Classification of Solar Batteries under GST:
The applicant manufactures batteries used in solar power generating units. The batteries store solar electricity and maintain a uniform power supply. The applicant contends that solar batteries are integral parts of solar power generating systems and should fall under entry no. 234 of Schedule I of Notification 1/2017 - Central tax (rate). The Authority agreed, recognizing solar batteries as parts of renewable energy devices, thus qualifying under entry no. 234 with a GST rate of 12%.

4. Classification of Composite Supply of Solar Inverter, Solar Battery, and Solar Panel under GST:
The applicant supplies solar inverters, batteries, and panels as a composite unit. The term 'Composite Supply' under Section 2(30) of CGST Act means a combination of two or more supplies naturally bundled and supplied together, with one being the principal supply. The Authority determined that the combination of solar inverter, battery, and panel constitutes a composite supply as they work together as a "Solar Power Generating System." This composite supply falls under entry no. 234 of Schedule I of Notification 1/2017 - Central tax (rate), attracting a GST rate of 12%.

Ruling:
1. The combination of solar panel, inverter, solar battery, and charge controller qualifies as a "Solar Power Generating System" when supplied in assembled form, treated as composite supply with a GST rate of 12%.
2. If solar inverter and battery are supplied individually and invoiced separately, it constitutes a mixed supply with a GST rate of 18%.

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