TaxTMI 
TaxTMI 
2019 (11) TMI 995
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....ed themselves as engaged in the operation 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 ....
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...., module mounting, (vi) D C Cabling and (vii) Commissioning of solar power plant. b. The 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 s....
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....ply Section 2(30) of CGST Act defines composite supply to mean 'a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which 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 ....
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....l pronouncement under the Excise Law can be examined. 4.2.6 Reference is made to the judgment of Delhi Tribunal in the case of Rajasthan Electronics & Instruments Ltd. vs. Commr. Of C. Ex., Jaipur = 2004 (7) TMI 259 - CESTAT, NEW DELHI wherein it was held that '7. The adjudicating authority admitted the fact that Solar 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 energ....
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....ply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply'; 4.2.13 Further, Principal Supply has been defined 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 p....
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....alling under heading 84,85 or 94. 5.6 Reference is also made to the erstwhile excise law, wherein various judgments have been pronounced in case of wind operated electricity generators where it has been held that specific goods supplied for such generators would also be eligible for the exemptions extended to the generators as 'wind operated electricity generator'. • 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....
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....e growth of solar power generating plants in the country. Accordingly, concessional rate of 5% should also be available to parts of solar power generating system supplied on standalone basis. 5.8 Basis the understanding, it can be deduced that the components which are essential for setting up of the solar power plant together will qualify as parts of solar power generating system (falling under Chapter 84,85 or 94) and hence, 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....
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.... are also provided as part of the contract), the same should qualify as composite supply and all goods supplied should get covered as part of principal supply of 'solar power generating system' and taxable at 5% GST. 8.3 Even where contract of goods do not include all products (such as where PV modules are not supplied and are procured by developer on its own) and only balance products are supplied, the goods should qualify as 'parts of solar power generating system' and should be eligible for concessional rate of 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/ m....
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....ame appears in the entry in Serial No. 234 of Schedule I of Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 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 This 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 manufactu....
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....ower plant, preparing the drawings/ map, preparing the estimate, sourcing the various goods required, carrying out the construction of civil structures involved, testing the equipments and finally commissioning the power project. The applicant desires to vivisect this entire setting up of the plant into two contracts, wherein one deals with the supply of the required goods like PV Modules, electrical transformers, switches, wires, material required for construction etc and the other dealing only with the aspect of providing services. 16.2 The contract with the EPC contractor is primarily for the setting up of the power plant as a whole. The various warranties and guarantees are intricately associated with 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 serv....
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....act. 16.4 The answer to the first question is that for the period up to 31.12.2018 the EPC contract is required to be considered as a works contract and has to be taxed accordingly. The artificial vivisection into two contracts, as envisaged, shall not rob the contract of its essential nature of a works contract. 17. The second question is whether parts supplied on standalone basis (when supplied with PV modules) would also be eligible to concessional rate of 5% as parts of solar power generation system. 17.1 In respect of goods we find that Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 provides for the tax rate of various goods. Serial No. 234 of Schedule I of Notification No. 1/2017 - Central 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 (....