TaxTMI 
TaxTMI 
2019 (10) TMI 948
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....y Engineering, Procurement & Construction (EPC) Contract for construction of solar power plant wherein both goods and services are supplied can be construed to be a composite supply in terms of Section 2(30) of CGST Act, 2017? b) Whether the supply of 'Solar Power Generating System' is taxable at 5% GST? 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that he wishes to engage in EPC Contract for supply of Solar Power Generating System and the operation and maintenance of the installed solar power plants. b. The applicant wishes to enter into contract with various developers who desire to set up and operate solar photovoltaic plants for supply of power generated. The applicant also wishes to be project developer wherein they would be engaged in operation of renewable energy power plant projects. c. Typically a turnkey contract would be entered by the applicant to do end to end setting up of a solar power plant which includes supply of various goods (such as modules junction boxes, module supporting structures, transformers, switchgears, etc.) as well as complete design, engineering and studies transportation unloading, storage ....
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....pplicant understands that the principal supply is that of supply of goods and supply of services is merely incidental to supply of goods. Further, the solar power generation plant is movable goods and supply of goods being the principal supply and hence the applicant understands that the entire contract shall be taxed as supply of goods at 5% as stated above. 7. The applicant submits that as per the Notification No. 1/2017 - Central Tax (rate) referred to above, concessional rate of 5% has been provided to the goods when covered under heading 84, 85 and 94. In the said entry, there is no restriction provided on what would qualify as parts and in such cases all goods which qualify as parts of solar power generating system should be eligible for concessional rate of tax. 7.1 The applicant submits that the above said notification provides rate of tax for Solar Power Generating System as 5% by considering the entire solar power generating system as goods. Hence the applicant is of the understanding that they also would be providing entire solar power generating system to the clients and accordingly the rate of tax applicable is that 5%. 7.2 The applicant submits further that once th....
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....lify as composite supply are as below: a. Two or more taxable supplies of goods and/ or services; b. The taxable supply should be naturally bundled in ordinary course of business c. The taxable supply should be supplied in conjunction with each other; and d. One of the taxable supply should be a principal supply In case the supply is construed to be a composite supply, the supply which is the principal supply is treated as the main supply and the entire transaction is taxed as per the principal supply. 11. The applicant submits that in the present case, the nature of work undertaken by the applicant involves supply of goods around 80-85% and balance is supply of services. Hence the applicant understands that the principal supply is that of supply of goods and supply of services is merely incidental to supply of goods. Further, as per the legal provisions, the applicant understands that in the present case, since the scope of work of the applicant includes provision of both goods and services, the entire contract is one turn-key EPC contract and hence would qualify as a composite supply. The principal supply is of supply of goods for 'solar power generating system* and he....
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....Therefore, it is clear that the movement of the solar plant can be done and only cost would be transportation and packing. Accordingly, the applicant understands that Solar Plant is movable goods. 14.3 The applicant submits that the words "moveable property" and "immovable property" are not defined in GST. Accordingly, the definition provided in the General Clauses Act would be applicable and the same is reproduced below: "Section 3(36) - "movable property" shall mean property of every description, except immovable property." Section 3(26) - "immovable property" shall include land, benefits to arise out of land and things attached to earth, or permanently fastened to anything attached to the earth." 14.4 The word "attached to earth" is not defined in the General Clauses Act, however the same is defined in Transfer of Property Act and the same is as under: "Section 3 - "attached to the earth" - (a) Rooted in the earth, as in the case of trees and shrubs; (b) Imbedded in the earth, as in the case of walls and buildings; (c) Attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached." 14.5 The applicant submits that, t....
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....e applicant submits that the machinery for metal shaping and electroplating which was attached by bolts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Accordingly the same cannot be considered as attached to the earth to treat it as immovable property. Accordingly as per the applicant understands the solar plant is movable property. 14.10 From the above, the applicant submits that, a. the solar power plant in the present case is not as per se immovable property. b. The plant cannot be said to be 'attached to earth' as per section 3 of Transfer of Property Act. c. The fixing of plant to the foundation is meant only to give stability to the plant to keep its operation vibration free. d. The setting up of the solar plant is not intended to be permanent at a given place. e. The plant can be moved. From the above, the applicant understands that the solar plant cannot be a immovable property and accordingly, the activity of the applicant cannot be considered as works contract. 14.11 From the above submissions ma....
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....te that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 16.1 The contract is for the establishment of a solar power generating system on turn-key basis and also for the operation and maintenance of the installed power plants. The draft sample agreement provided by the applicant reveals that what is required by the clients of the applicant is the services in relation to designing, engineering, procurement, construction, fabrication, installation, commissioning and testing of materials and equipment for the implementation and development of the Project and the applicant agrees to provide such services in accordance with the specifications and the draft agreement. 16.2 Clause (yy) of para 1.1 of Definitions section of the model draft agreement defines "work" as under: "Work" means all the work (other than the Scope of Work of Developer) that is required to be carried out for implementation of the Project at die Project site and performance of all the obliga....
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....ering & Supply 1 Solar Photovoltaic Modules 2 Fixed Module Mounting Structures 3 String Combiner Box 4 Inverters 5 Weather Station 6 Data Logger System 7 Sensor Boxes for connecting to data logger 8 Transformer 9 HT panel 10 Switch yard 11 Metering Panel and two pole structure with isolator 12 Plant lighting protection for yard and control room 13 Complete plant earthing system 14 Cables - DC & AC 15 Cable support, Cable trays etc 16 Battery Bank with Charger II Installation and Commissioning 1 Interconnection of solar PV Modules on MMS 2 Fixing the modules on MMS 3 Cabling from array to string combiner box 4 Cabling from SCB to Inverters 5 Cabling from Inverter to Transformer 6 Cabling from Transformer to HT Panel / Switch Yard 7 Control Room wiring and associated cabling 8 Laying the cables in the inverter control room III Guarantees and Warrantees 1 Warranty of the system in accordance w....
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.... 11 Pollution Control Board Schedule -3 of the Model Agreement - 1. Contractor's erection all risk insurance for replacement value including a. Extended warranty covering Defects Liability Period b. Malicious damage c. Terrorism cover d. Debris removal e. Off-site storage f. Acts of God g. Earthquake cover h. Testing and commissioning during the implementation period shall be in the contractor's scope of work. Insured Value shall be equal to 100% of Contract Value. 2. Transit Insurance shall be in the contractor's scope of work. Transit insured value shall be equal to 100% of equipment value. Schedule 4 which is related to Contract Price reads as under: The agreement shall follow the contract price and conditions as stated in paragraphs below: (a) Contract Value: Rs...........inclusive of all taxes, for .... MW (AC) (b) Modules. Of the above Contract Value, approx. 55% shall be the cost of solar modules (c) Balance of Materials. Of the above Contract Value, approx. 45% shall be the cost of Balance of Material. All the above point to the fact that what is contracted is a project in itself and this involves the supply of both goods and services....
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....ting up of following, - (a) Bio-gas plant (b) Solar power based devices (c) Solar power generating system (d) Wind mills, Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants / devices (f) Ocean waves/tidal waves energy devices/plants Explanation:-This entry shall be read in conjunction with serial number 234 of Schedule I of the Notification No. 1 /2017-Central Tax (Rate), published in the Gazette of India, Extraordinary, Part 11, Section 3, Subsection (i) dated 28th June, 2017 vide GSR number 673(E) dated 28th June, 2017. 9 - The entry in Serial No.234 of Schedule I of Notification No. 1/2017 - Central Tax (Kate) dated 28.06.2017 reads as under: SI.No. Chapter/ Heading/ Sub-Heading/ Tariff item Description of Goods 234 84, 85 or 94 Following renewable energy devices & parts for their manufacture (a) Bio-gas plant (b) Solar power based devices (c) Solar power generating system (d) Wind mills, Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants / devices (f) Solar lantern / solar lamp (g) Ocean waves/tidal waves energy devices/plants It is clear from the above, that Solar Power Generating System is go....