GST treatment of solar EPC supplies under the 70:30 valuation mechanism, despite separate invoicing for goods and services.

The amended GST notifications for solar power generating systems apply a 70:30 valuation mechanism, under which 70% of the consideration is treated as goods taxable at 5% and 30% as services taxable at 18%. The goods and services entries, read with their explanations, operate together to cover erection, procurement and commissioning contracts, and separate invoicing does not by itself alter the contractual character of the supply or take it outside the notified scheme. An assessment that levies 18% on the entire turnover without first bifurcating the value of goods and services is not sustainable, and the supplier remains entitled to the notified 70:30 treatment.

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Issues: Whether the supply of solar power generating systems and related services was liable to GST under the 70:30 mechanism contained in the relevant notifications, notwithstanding the issuance of separate invoices for goods and services.

Analysis: The relevant notifications, as amended, create a legal fiction for supplies of solar power generating systems under which 70% of the consideration is treated as value of goods taxable at 5% and 30% as value of services taxable at 18%. The explanation attached to the goods entry and the services entry operate conjointly and are intended to cover supplies made under erection, procurement and commissioning contracts. Mere separate invoicing does not, by itself, displace the contractual character of the transaction or take the supply outside the notified entries. The assessing authority also failed to undertake any proper exercise of bifurcating the value of goods and services before levying 18% on the entire turnover.

Conclusion: The petitioner was entitled to the benefit of the 70:30 mechanism, and the assessment levying differential tax at 18% on the entire supply was unsustainable.

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