TaxTMI 
TaxTMI 
2019 (10) TMI 948
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....on: a) Whether the supply of turn-key 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 ....
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....ST Act, 2017. 6. The applicant states that the nature of work undertaken by him involves supply of goods around 80%-85% and balance is supply of services. Hence applicant 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 woul....
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.... (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." 10. From the above legal provisions, the conditions for any supply to qualify 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 ....
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.... than a shirt button) and can easily be removed within 20 seconds. The solar inverters which are the next most expensive item (4%) are also not attached to the earth. They are simply mounted on concrete foundations and can be moved to any other location within less than an hour. 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 ....
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....ions is founded on the interest in the land wherein the person who causes the annexation possesses articles merely resting on their own weight arc fixtures only if they are attached with the intention of permanently improving the premises. Attachment to the earth must be as defined in Section 3 of the Transfer of Property Act. 14.9 Further the 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 k....
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....rers and traders engaged in said supply." DISCUSSION AND FINDINGS 16. We have considered the submissions made by the applicant in their application for advance ruling as well as the additional submissions made by Sri Rajesh Kumar, CA, during the personal hearing. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. At the outset, we would like to state 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 Proje....
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....ves the Bill of Quantities and includes Control Rooms, construction of security posts and entry gate, Chain link fencing, Bill of Materials (other than modules) includes Module Mounting Structure, Distribution Transformer 0.400v/ 33 KV and 33kV Outdoor Breaker, Roads etc. The Schedule 2 which gives the scope of work (contractor) states the following SI.No. SI.No. PARTICULARS A Design, Engineering, Supply, Installation, Testing and Commissioning 1 PV & Electrical Items - Design, Engineering & 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 & ....
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.... schedule 3 8 Transport 9 Freight 10 Packing and forwarding E List of spares 1 Spares list required to be maintained at site will be provided by the Contractor and shall be bought by the developer F Post design drawings to be submitted to owner 1 As built drawings-2 soft copies and 2 hardcopies 2 0 & M Manual - 2 soft copies and 2 hard copies G Permissions and approvals to be obtained by contractor 1 MNRE Excise Duty Exemption 2 MNRE Customs Duty Concession 3 Evacuation Clearance 4 Interconnection clearance / Bay construction approval 5 Metering scheme. CT/PT and Testing Approval 6 CEIG Approval 7 Electrical Inspector Approval for Transmission Line and Bay 8 Right of way for Tx 9 Inspection of Factories 10 Village Panchayat Clearance 11 Pollution Control Board Schedule -3 of the Model Agreement - 1. Con....
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.... commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;" In the pertinent case, the contract is for the engineering, procurement and commissioning of the solar power generating system and what is transferred is the entire power generating system including the civil works involved in the project. The project after completion at the time of transfer is an immovable property as there are no separate considerations for the individual components of the project. Further, the maintenance and other related services are also part of the contract and involve the maintenance of the project as a whole. 17.3 Regarding the issue of taxability of EPC contract of "Solar Power Generating System" it is seen that Serial No. 38 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 27/2018 - Central Tax (Rate) dated 31.12.2018 reads as under: Sl.No. Chapter, Section or Heading Description of Service Rate (per cent.) Condition 38 9954 or 9983 or 9987 Service by way of construction or engineering or installation or other....
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....ication No. 27/2018 - Central Tax (Rate) dated 31.12.2018 has come into effect from January 1st, 2019 and hence the contract of the applicant is covered under this entry after 01.01.2019. However for the period earlier to this date, the contract of the applicant would be covered under works contract under the description "composite supply of works contract as defined in clause 119 of Section 2 of CGST Act, 2017" in entry no.3 of the Notification No.11/2017 - Central Tax (Rate) dated 28.06.2017 and is liable to tax at 9% under CGST Act and 9% under KGST Act, 2017. Further, an explanation has been inserted to the entry no.234 of Schedule I of the Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 by Notification No. 24/2018- Central Tax (Rate) 18. The contention of the applicant that the solar power plant is not an immovable property is not acceptable for the reason that all the components cannot be recovered on retrieval of the plant and without those elements the solar power plant cannot be stated to work properly. What can be retrieved without cannibalization is only the solar panels and certain other elements which are only part of the entire project and hence t....