EPC contract for solar power plant

[K Balasubramanian]

There is an option available to pay taxes on 70% of Gross Consideration for materials and 30% of gross consideration on Services @ 18%. Is this facility optional or mandatory?? Notification number 08/2021 Central taxes (Rate) dated 30/09/2021 refers

[Amit Agrawal]

Subject referred by you, is issued in exercise of the powers conferred by sub-section (1) of section 9 and sub-section (5) of section 15 of the Central Goods and Services Tax Act, 2017 (12 of 2017)

Relevant explanation from notification referred by you, reads as follows:

Explanation:- If the goods specified in this entry are supplied, by a supplier, along with supplies of other goods and services, one of which being a taxable service specified in the entry at S. No. 38 of the Table mentioned in the notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 [G.S.R. 690(E)], the value of supply of goods for the purposes of this entry shall be deemed as seventy per cent. of the gross consideration charged for all such supplies, and the remaining thirty per cent. of the gross consideration charged shall be deemed as value of the said taxable service.]

If supplier is fulfilling conditions of this explanation and supplying defined goods & defined services, then, it is mandatory to follow 'deemed value' for goods (i.e. 70%) & services (30%) supplied.

P.S. I am presuming the constitutional validity of Section 17(5) read with above referred notification.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

However, it appears to me that above-said explanation can not seen as 'overruling' the 'Section 7(1A) read with Serial No. 6 (a) of Schedule - II' or Section 8 of the CGST Act, 2017.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

This method of deemed valuation and rate of tax is under challenge in a high court.

AI Summary

Deemed valuation under GST: mandatory allocation between goods and services when notification conditions are met, subject to challenge.
The notification prescribes a deemed valuation for supplies where specified goods are supplied alongside a taxable service: the goods' value is deemed as seventy per cent of gross consideration and the remainder deemed as the service value; when conditions are met this allocation is mandatory, but its interplay with general statutory valuation rules is contested and subject to High Court challenge.