TaxTMI 
TaxTMI 
2019 (11) TMI 995
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....ion of renewable energy power plant projects, which typically include operation of solar power plants set up across India for generation and distribution of electricity generated. It's further claimed that they are emerging as a leading builder of renewable energy projects. Furthermore Solarys is said to be established under Independent Power Producer ('IPP') category for setting 'up and sale of power produced from their plant to third party. Exhibit Il, para 4, of the application further provides that Solarys enters into contracts with Project Developing Companies (or EPC contractors) for various activities. All these facts enumerated by Solarys at various places in their application indicate that Solarys owns solar power plants. However during the hearing Solarys had submitted two draft agreements where they are shown as the EPC contractors or the supplier instead of being shown as owners as claimed in the application. Therefore while the application describes Solarys as the recipient of supply in terms of their solar plant being set up by EPC contractors, the agreements submitted by them describe them as the suppliers engaged the design and setting up of solar power plants owned....
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....he applicant enters into contracts with various Project Development Companies ('EPC Contractor') for various activities, as part of setting up of solar power plant. The key features of such contracts are (i) the contracts typically include offshore supply, onshore supply and supply of works and services. Goods may be imported or procured locally under such contract, (ii) Separate contracts are awarded by the Applicant for supply of goods & services and (iii) sub-contractors may also be appointed for civil works by the EPC contractor. c. The major goods procured, as part of contract for goods, for setting up of the plant include solar PV modules, Inverters & Inverter Transformer, Tracker Components, Module Monitoring Structure, Switchyard Supply, Transmission line supply, AC/DC Cables, Chain Link Fencing, Battery Charger, Power Transformer, LD Switchgear & complete switchyard, Inverter Transformers and auxiliary transformers, Battery & Battery Charger, SCADA system, Module cleaning system, Illumination & ventilation system, Earthing system, Site enabling facilities and Mandatory spares. d. The various services provided, as part of services contract, include (i) Construction of c....
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.... are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply Section 2(90) defines principal supply as the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary'. On a plain reading of the definition of Composite Supply, it emerges that the following conditions must be satisfied for a supply to qualify as a 'composite supply' * The supplies being made must be taxable supplies * The supplies should be naturally bundled and supplied in conjunction with each other in the ordinary course of business. * There must be a principal supply. 4.1.4 Their understanding in present context: Per the above legal provisions, the applicant understands that in present case, since there are separate contracts for supply of goods and services, the taxability should be as under: * Contract for goods wherein solar PV modules are also supplied - Entire contract should qualify as supply of solar power generating system and should be taxable at 5% * Contract for goods wherein solar PV modules are no....
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....lar Photovoltaic Module is a Solar Power Generating System. We find that other parts are only panel housing consisting of controllers and switches, Hence the whole system is a Solar Power Generating System and is entitled for the benefit of notification. Therefore, the denial of benefit of notification by the adjudicating authority is not sustainable. The impugned order is set aside and the appeals are allowed.' 4.2.7 Further, in the case of Bangalore Tribunal in the case of B.H.E.L. vs. Commissioner of Central Excise, Hyderabad = 2007 (10) TMI 165 - CESTAT, BANGALORE it was held that: "In the present case, the appellants have claimed exemption in respect of "inverter charger card" as solar power generating system. The appellants actually manufactured SPV lantern. The above lantern required electricity for its It is possible to convert solar energy to electricity with the help of inverter charger manufactured by the appellants. The Dy. General Manager has certified that the inverter merger constitutes solar power generating system as it performs the function of generating the required high frequency AC power from in-light with, the help of SPV module and supplying it to the comp....
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....efined in Section 2(90) of the CGST Act as 'principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary'. Thus, principal supply refers to the supply which is the predominant element in a composite supply. 4.2.14 In terms of Section 8 of the CGST Act, it has been clarified that a composite supply comprising two or more supplies, one of which is a principal supply will be treated as supply of such principal supply. 4.2.15 Based on the above, a conclusion can be drawn that where a contract consists of supply of various goods all of which are intended for setting up a solar power plant, the entire contract should be treated as a composite supply for which the principal supply is providing a solar power generating system and hence, entire supply contract (which would include PV modules as well as all other goods) should be taxable at 5% as 'Solar Power Generation System' It is further submitted that Ministry of New and Renewable Energy ('MNRE') in various instances has also approved entire BOQ consisting of various parts e.g. cables, module moun....
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.... * In Gemini Instratech Pvt. Ltd., Vs Commissioner of Central Excise, Nashik [2014 (300) ELT 446 (Tri.-Mum)] = 2013 (7) TMI 464 - CESTAT MUMBAI the issue involved was whether doors specifically designed to be used with tower on which wind operated electricity generators are installed be eligible for benefit of notification which provides exemption from payment of excise duty to wind operated electricity generators and its components and parts thereof. It was held that such doors would also be eligible for the exemption. This was also ratified by the Supreme Court [2015 (315) ELT A82 (SC)] = 2012 (1) TMI 161 - SC ORDER * In Elecon Engineering Co. Ltd., Vs Commissioner of Customs [1998 (103) ELT 395 (Tri)] = 1998 (3) TMI 359 - CEGAT, MUMBAI the issue involved in the case was whether power cables, earthing cables, wind farmer computer will be eligible for benefit of exemption under Notification 64/94-Cus. The Tribunal held that power cables and control cables together form part of inside cabling of wind turbine controller, since, control cables are eligible for exemption, the benefit of exemption has to be extended to power cables also. * In Pushpam Forging vs CCE, Raigad [2006 (1....
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....should be eligible for concessional rate of 5%. 6. Whether benefit would also be available to sub-contractor: 6.1 In a typical contract structure, the EPC contractor engages various sub-contractors (manufacturers/ supplies/ sub-contractors) who further supply the goods to EPC contractor. (and EPC contractor supplies to the SPV) 6.2 Notification No.01/2017-Integrated Tax (Rate), which provides concessional rate on solar power generating system, does not specify the persons who would be eligible for concessional rate of 5% i.e. Developer, EPC contractor or manufacturer/ supplier/ sub-contractor. 6.3 Since the concessional rate of 5% is provided to renewable energy products and parts thereof, the same should be applicable to all suppliers providing such products as long as it can be established (through certification or otherwise) that these are to be used in solar power generating system. This would also be in line with practice under erstwhile excise law wherein benefit was extended to sub-contractors also through MNRE certification. 7. Taxability of Contract for services: 7.1 A separate contract is awarded to the EPC contractor for provision of services which consists of the ....
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....5% GST as long as the same are covered under heading 84, 85 or 94. 8.4 Concessional rate of 5% for supply of solar power generating system or its parts should also be available to sub-contractors. PERSONAL HEARING: / PROCEEDINGS HELD ON 09.02.2018. 9. The Applicant submitted Specific Power of Attorney appointing M/s. Price Waterhouse Coopers Private Limited, represented by Shri Prashanth Agarwal, as their authorized legal representative, who attended the proceedings held before the Authority on Advance Ruling in Karnataka, Bengaluru on 09.01.2018 and stated / pleaded that the applicant enters into two different contracts i.e. for supply of goods/ material and for supply of services; the developer may procure main parts of the solar power generating system (PV modules) on their own which attract 5% and remaining parts may be supplied by contractor which also should attract 5%; in case the contractor supplies all the material / goods including PV modules, the rate should be 5% and requested for adjournment for submission of the copies of model contracts. 10. The authorized representative of the applicant appeared again and hearing proceedings were held on 09.02.2018. 11. The re....
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.... entry provides that a solar power generating system is taxable at the rate of 5%. 15.1 Further vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018, an amendment was carried out and Serial No. 38 was inserted in Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 in respect of services related to setting up of solar power plants. The entry at Serial no. 38 is as follows: Sl.No. Chapter/Heading/Sub-Heading/ Tariff item Description of Goods 234 84 or 85 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 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 II, Section 3, Subsection (i) dated 28th June, 2017 vide GSR number 673(E) dated 28th June, 2017. The explanation to the entry provides that the changes have to be read in con....
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....th both the goods and the services involved in the setting up of the power plant. The essential relationship between the owner of the solar power plant and that of the EPC contractor is a singular relationship, that of starting from scratch and bringing into existence a fully operational solar power plant with the attending guarantees and warranties related to its proper functioning, be it in relation to goods or the services performed. Artificial vivisection of the goods and services aspects of the singular *contract would run contrary to the spirit of the contract. The supply of goods and the related services are so intricately connected that the same cannot be bifurcated by reasonable means. The execution of this contract involves the transfer of property in goods. 16.3 In the light of these facts we examine the definition of 'works contract' as provided in Section 2(119) of the CGST Act, 2017. It defines 'works contract' as a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whe....
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....ntral Tax (Rate) dated 28.06.2017 is relevant to the issue and reads as under: Sl.No. Chapter/Heading/Sub-Heading/ Tariff item Description of Goods 234 84 or 85 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 The Notification provides that items covered under Chapters 84 or 85 which constitute renewable energy devices and parts required for their manufacture are covered under the aforesaid entry no. 234 and are liable to be taxed at 5%. This essentially implies that those parts are liable to 5% tax only if they go into the manufacture of the Solar power generating system. 18. The third question is whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to subcontractors. Entry No. 234 in Schedule I to Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 does not differentiate between supplies by the contractor or the ....