2023 (12) TMI 1270 - AAR - GST

Solar pump with panel and controller treated as mixed supply under Section 2(74) CGST Act requiring highest GST rate

The AAR-UP ruled that supply of solar driven submersible pump consisting of solar panel, controller, and water pump constitutes mixed supply, not single ... Classification of goods - HSN classification - composite supply - mixed supply - principal supply - treatment of mixed supply under Section 8(b) - tax rate on mixed supply - treatment of components as separate supplies - GST rate applicable to solar panels - GST rate applicable to motor controllers - GST rate applicable to power driven pumpsClassification of goods - GST rate applicable to solar panels - GST rate applicable to motor controllers - GST rate applicable to power driven pumps - treatment of components as separate supplies - Applicable GST rate and classification for the components of a solar driven submersible pump. - HELD THAT: - The Authority examined the constituent components submitted (solar panels, controller and submersible pump) and held that the components are distinct goods capable of independent use. Solar panels (photovoltaic modules) are classifiable under heading 8541 43 00 and attract GST at the rate prescribed for such photovoltaic cells/modules. Controllers, being electrical transformers/static converters/inductors, fall under Chapter Heading 8504 and attract the rate prescribed for that heading. Submersible pumps are classifiable under heading 8413 as power-driven pumps primarily designed for handling water and attract the rate prescribed for such pumps. In the absence of technical specifications to show that the entire assembly functions only as an inseparable solar device, each component must be classified according to its respective tariff heading and rate. Having identified the classification and applicable rates for the individual components, the Authority applied the mixed-supply rule (see issue on nature of supply) to determine the GST to be levied on the composite offering in the applicant's case. [Paras 11]Solar panels are classifiable under heading 8541 43 00 and chargeable to GST at the rate applicable to that heading; controllers are classifiable under heading 8504 and chargeable at the rate applicable to that heading; submersible pumps are classifiable under heading 8413 and chargeable at the rate applicable to that heading.Mixed supply - composite supply - principal supply - treatment of mixed supply under Section 8(b) - tax rate on mixed supply - HSN classification - Whether the supply of solar panel, controller and submersible pump taken together is a single/composite supply or a mixed supply and the GST treatment/HSN outcome for such supply. - HELD THAT: - Applying the statutory definitions of 'composite supply' and 'mixed supply', the Authority found that the three items are not naturally bundled in the ordinary course of business, no principal supply can be identified, and each item can be supplied separately. Therefore the aggregate offering proposed by the applicant does not constitute a composite supply but falls within the definition of a mixed supply. Under the rule for mixed supplies, the entire supply is to be treated as the supply attracting the highest rate of tax among the component supplies (as per Section 8(b) logic applied by the Authority). Consequently, for the applicant's proposed supply of the solar-driven submersible pump system (solar panel + controller + pump), the highest applicable GST rate among the component goods governs the tax liability. The Authority recorded that the HSN to be used will accordingly be determined by treating the supply as a mixed supply and applying the highest rate amongst the goods supplied. [Paras 12, 13, 14]The combined supply of solar panel, controller and submersible pump is a mixed supply; the entire supply is taxable at the highest rate applicable to any of the component goods, and the HSN/treatment for invoicing shall follow that mixed-supply determination.Final Conclusion: The Authority ruled that the constituents of the solar driven submersible pump are to be classified under their respective tariff headings (solar panels under photovoltaic modules; controllers under Chapter 8504; submersible pumps under heading 8413). The composite offering proposed by the applicant is a mixed supply, and GST is to be charged at the highest rate applicable to any of the component goods; accordingly the applicable tax rate on the applicant's supply is 18% (CGST 9% + SGST 9%) within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh. Issues Involved:1. Applicable tax rate on the sale of solar-driven submersible pumps.2. HSN code for solar-driven submersible pumps.Summary:Issue 1: Applicable Tax Rate on Sale of Solar-Driven Submersible PumpThe applicant, M/s Aastha Traders, sought an advance ruling on the GST rate applicable to solar-driven submersible pumps. The Authority for Advance Ruling (AAR) examined the components of the solar-driven submersible pump, which include solar panels, a controller, and a water pump. It was determined that each component has its own classification and corresponding GST rate:- Solar Panels: Classified under Tariff heading 8541 43 00, chargeable to GST at 12% (6% CGST + 6% SGST).- Controller: Classified under Chapter Heading 8504, chargeable to GST at 18% (9% CGST + 9% SGST).- Water Pump: Classified under Tariff heading 8413, chargeable to GST at 18% (9% CGST + 9% SGST).The AAR concluded that the supply of these components together does not constitute a 'composite supply' but rather a 'mixed supply' as defined under Section 2(74) of the CGST Act. Consequently, as per Section 8(b) of the GST Act, the highest rate of tax among the supplied goods applies. Therefore, the applicable tax rate on the sale of solar-driven submersible pumps is 18% (CGST@9% and SGST@9%).Issue 2: HSN Code for Solar-Driven Submersible PumpThe applicant also sought an advance ruling on the HSN code for solar-driven submersible pumps. The AAR determined that since the supply involves different components (solar panels, controller, and water pump) that can function independently, it does not qualify as a 'composite supply.' Instead, it is treated as a 'mixed supply.' As a result, the highest rate of GST among the supplied goods applies. The specific HSN code for each component would be:- Solar Panels: HSN 8541 43 00.- Controller: HSN 8504.- Water Pump: HSN 8413.Therefore, the HSN code for the solar-driven submersible pump will be treated as a mixed supply, and the highest rate of GST will be applicable among the goods supplied by the applicant.Ruling:1. Applicable Tax Rate: 18% (CGST@9% and SGST@9%).2. HSN Code: Treated as mixed supply, with the highest rate of GST applicable among the goods supplied.This ruling is valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and subject to provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.