Supply of Solar Power Generating System held composite supply, not works contract under GST Section 2(119)

HC held that the supply of the Solar Power Generating System is a composite supply and not a works contract under the GST Act. The court found the solar modules are not immovable property since they were not attached to the civil foundation for the permanent beneficial enjoyment of that foundation; rather the foundation serves the plant. Consequently the transaction does not fall within Section 2(119)'s definition of works contract, and the petition was allowed.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the transactions undertaken by the petitioner in setting up Solar Power Plants should be classified as a "composite supply" or a "works contract" under the GST Act.
• Whether the Solar Power Generating System constitutes immovable property, thereby falling under the definition of "works contract" as per Section 2(119) of the GST Act.
• What is the applicable GST rate for the transactions in questionRs.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Transactions

• Relevant Legal Framework and Precedents: The GST Act defines "composite supply" under Section 2(30) and "works contract" under Section 2(119). The determination of whether a transaction is a composite supply or a works contract affects the applicable GST rate.
• Court's Interpretation and Reasoning: The court analyzed the definitions and noted that a works contract is a type of composite supply involving immovable property. The distinction hinges on whether the end product is movable or immovable.
• Key Evidence and Findings: The petitioner argued that the Solar Power Generating System is movable, while the respondents contended it is immovable. The appellate authority classified it as immovable due to its installation nature.
• Application of Law to Facts: The court examined whether the Solar Power Generating System is permanently attached to the earth. The court applied precedents from the Supreme Court to assess the nature of the property.
• Treatment of Competing Arguments: The petitioner relied on various Supreme Court decisions to argue the system is movable. The respondents cited judgments supporting the immovable classification.
• Conclusions: The court concluded that the Solar Power Generating System is not immovable property and thus does not constitute a works contract. It is a composite supply subject to a lower GST rate.

Issue 2: Nature of the Solar Power Generating System

• Relevant Legal Framework and Precedents: The court referred to the definitions of "movable" and "immovable" property under the General Clauses Act and the Transfer of Property Act.
• Court's Interpretation and Reasoning: The court applied the Supreme Court's guidelines to determine the nature of the property, focusing on whether the system is permanently attached to the earth.
• Key Evidence and Findings: The court considered the installation process and the system's components, which are bolted and not permanently embedded.
• Application of Law to Facts: The court found that the system's attachment does not meet the criteria for immovable property, as it can be dismantled and relocated.
• Treatment of Competing Arguments: The court distinguished the present case from precedents cited by the respondents, where the property was permanently embedded.
• Conclusions: The court held that the Solar Power Generating System is movable property, not subject to classification as a works contract.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The property in question, viz., the Solar Power Generating System would not answer the description of immovable property. The transaction in question would not fall within the meaning of 'works contract' as defined under Section 2(119) of the GST Act."
• Core Principles Established: The classification of property as movable or immovable depends on the nature of attachment to the earth and the intent of permanence. A composite supply does not automatically become a works contract unless it results in immovable property.
• Final Determinations on Each Issue: The court determined that the Solar Power Generating System is a composite supply, not a works contract, and is subject to a GST rate of 5%.

---