2026 (3) TMI 721 - HC - GST

Apportionment of consideration for solar power systems mandates a goods-services split, yielding a single reduced uniform tax on gross consideration.

Supply of solar power generating systems supplied with taxable services falls under Entry No.234 as amended by Notification No.24/2018; the explanation ... Applicability of Entry No.234 of Schedule-I of Notification No.1/2017 and the explanation inserted by Notification No.24/2018 - execution of works contracts relating to movable property - supply of Solar Power Generating Systems and operation and maintenance of such services - Whether the appropriate amount of tax and interest has been paid or not, is a question of fact, which can always be verified by the 3rd respondent or any proper officer. Concessional rate for solar power generating systems - Applicability of the notification explanation prescribing a 70%/30% apportionment and resulting uniform tax rate of 8.9% on the gross consideration for supplies involving Solar Power Generating Systems - HELD THAT:- The Court held that Entry No.234 of Schedule I in Notification No.1/2017, read with the explanation inserted by Notification No.24/2018 (w.e.f. 01.01.2019), applies to supplies of Solar Power Generating Systems even where such supplies occur in the course of contracts described as works contracts; the explanation requires treating 70% of the gross consideration as attributable to goods (taxable at the concessional rate) and 30% as services, which, when combined, yields a uniform effective rate of 8.9% on the gross consideration. The Court concluded that this statutory apportionment is applicable irrespective of whether the contract is characterised as relating to movable or immovable property and hence is determinative for the tax liability in the present matter. [Paras 5, 9] The assessment must be computed by applying the 70:30 apportionment and a uniform effective rate of 8.9% on the gross consideration for the supplies of Solar Power Generating Systems. The Court set aside the impugned assessment order and remanded the matter to the Assessing Authority to complete the assessment in terms of the judgment by applying the uniform rate of 8.9% on the gross consideration. The Court further observed that factual questions regarding whether the correct amount of tax and interest has been paid are matters of fact that the Assessing Authority or a proper officer can verify during reassessment. The question whether the contracts relate to movable or immovable property was left open and not decided by the Court in view of disposal on the basis of the notifications. [Paras 10, 11] Final Conclusion: The writ petition is allowed; the assessment for April 2018 to March, 2020 is set aside and remanded to the Assessing Authority to recompute tax by applying the 70:30 apportionment and a uniform effective rate of 8.9% on the gross consideration and to verify payment of tax and interest, while the question of movable versus immovable character of the contracts remains open. Issues: (i) Whether the supply of solar power generating systems and related contracts are to be taxed as works contracts relating to immovable property at 18% or can be taxed under the concessional entry for solar power devices at an effective uniform rate of 8.9% by applying the explanation to Entry No.234 of Schedule-I in Notification No.1/2017 as amended by Notification No.24/2018.Analysis: The Court examined the applicability of Entry No.234 of Schedule-I of Notification No.1/2017 dated 28.06.2017 and the explanation inserted by Notification No.24/2018 dated 31.12.2018 which prescribes that where goods covered by Entry No.234 (including solar power generating systems) are supplied along with taxable services, 70% of the gross consideration is to be attributed to goods (taxable at 5%) and 30% to services (taxable at 18%), yielding an aggregate uniform tax incidence of 8.9% on the gross consideration. The Court found that the explanation to Entry No.234 is applicable to supplies of the solar power generating systems in question irrespective of whether the contract is characterized as a works contract relating to immovable property or as a composite supply of goods and services. The Court noted that factual questions such as exact quantum of tax and interest paid and documentary break-up can be verified by the assessing authority on remand.Conclusion: The writ petition is allowed; the assessment dated 27.11.2024 is set aside and the matter is remanded to the assessing authority to complete assessment applying a uniform rate of 8.9% on the gross consideration for the relevant period, with verification of factual details including tax and interest payments.Ratio Decidendi: Where Notification No.1/2017 (Entry No.234) as amended by Notification No.24/2018 applies to supply of solar power generating systems supplied with taxable services, the explanation mandates apportionment of gross consideration as 70% for goods and 30% for services, and that apportionment governs tax incidence regardless of characterization of the contract as relating to movable or immovable property.