TaxTMI 
TaxTMI 
2019 (11) TMI 1363
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....for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act. 1. Brief Facts of the case: 1. M/s McNally Bharat Engineering Company Limited ("Applicant") is engaged in providing turnkey solutions in the areas of Power, Steel, Coal & Mining, Ports, Aluminium, Material Handling, Mineral Processing, Cement, Water, Oil & Gas and Infrastructure sectors such as Buildings & Townships, High Rises, Roads, Metro Rail, etc. 2. The applicant has entered into three contracts under Pre-GST regime with M/s Andhra Pradesh Power Generation Corporation Limited ('APGENCO') namely, i. Supply Contract; ii. Erection Contract; and iii. Operation and Maintenance Contract. for the purpose of establishment and Operation & Maintenance of 100MW grid connected Solar PV Project at Talaricheruvu Village, Near Tadipatri, Anantapur District in Andhra Pradesh. 3. The scope of the supply/ work under each of the above mentioned three contracts is as follows: A. Supply Contract: Design, Engineering, Manufacture/ Procurement Testing at manufacturer's works, Inspectio....
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....ents based on completed supplies /works. Therefore, the award of separate contracts shall not in any way dilute the responsibility for successful completion of the facilities, achieving the guaranteed performance of the plant, proper O & M of the plant after final acceptance by the corporation, etc. as per the tender specification and a breach in one contract shall automatically be construed as a breach of the other contracts which will confer a right on the Corporation to terminate other contracts also at the risk and the cost of the contractor." 7. Presently, the applicant is charging GST @ 5% on supply of solar modules and 18% on the other supplies of goods under the supply contract. In respect of civil works and other services covered under erection contract, the applicant is charging GST @ 18%. On Verification of basic information of the applicant, it is observed that the applicant falls under State jurisdiction, Assistant Commissioner, O/o. the Asst. Commissioner of State Tax, Steel Plant Circle, Visakhapatnam Division. Accordingly, the application has been forwarded to the State jurisdictional officer, with a copy marked to the Central Tax authorities to offer their re....
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....d 28.06.2017: Notification No. 01/2017- Central (Rate) specified the applicable rate of tax that shall be levied on intra-state supply of goods. The applicant claims that goods under question fall in 'Solar Power Generating system' under the entry No.234 of Schedule I of chapter heading /subheading 84 or 85. In the present case, the applicant has entered into three contracts with APGENCO namely, Supply contract. Erection contract and Operation & Maintenance contract Thus, the intention of APGENCO is to procure a completely functional solar power plant as a whole wherein applicant undertakes end to end responsibility of supply of equipment solar power plant including designing engineering, supply of Solar modules and other equipment, installation, testing and commissioning of a functional solar power plant as well as operation and maintenance of the power plant for a period of 5 years. Therefore the applicant submits that, though it has entered into three different contracts with APGENCO, it is only for the purpose of clear understanding of the scope & terms of each activity and for better execution of the project. Hence, the applicant submits that all the contra....
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.... of Section 8 (a) of the CGST Act, composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. Accordingly, the rate applicable for the said principal supply shall be applied for the entire composite supply. As mentioned above, supply of Solar modules would fall under 'Solar Power Generating System' as mentioned under entry 234 of schedule I of the Notification No. 1/2017 - Central Tax (Rate) dated 28th June, 2017 and the applicable rate of CGST is @ 2.5% and similar notification is also issued under AP GST Act. Therefore, the applicant submits that, in the present case, the principal supply is supply of solar modules and for which the applicable rate of GST (CGST + SGST) is @ 5%. In view of the above, the applicant submits that the supply of goods and services to APGENCO for establishment of 100MV Solar PV Power Project and operation & maintenance thereof is a composite supply and the principal supply is supply of solar modules and other equipment which would fall under the entry 234 of Schedule I of the Notification No. 1/2017- Central Tax (Rate). Accordingly, the applicable rate of GST....
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....er, supply of Solar Modules would be treated as principal supply and supply of transportation, storage, civil work, erection, installation, etc, and operation & maintenance of Solar Power Plant are incidental to supply of Solar Modules and other equipment. Alternative Submission: Alternatively, the applicant submits that, if supply of Solar Modules/Panels supply of transportation of materials, civil structures, erection, installation, testing, commissioning etc. and operation & maintenance of Power Plant is not a composite supply under GST law, then supply of materials i.e., Solar Modules are liable to CGST @ 2.5 % under entry 234 of Schedule I of Notification No.1/2017- Central Tax (R) dated 28.06.2017, since these are the parts & devices of the Solar Power Generating System. Similar notification is also issued under AP SGST act also. Therefore, effective rate of GST would be 5 % (CGST 2.5 % and SGST 2.5%). Accordingly, the applicant submits that, if Supply of Solar modules, transportation, civil work, transportation, testing, installation and commissioning services for establishment of Solar Power Projects and operation & maintenance of Solar Power Project is not a co....
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.... be eligible to be classified under SI. No.234 of Notification No.1/2017 - Central Tax (Rate) dated 28.06.2017. Hence, it would be subjected to tax at the rate of 5% (CGST 2.5% and SGST 2.5%) only. Further, the applicant also places reliance on the order passed by appellate authority for Advance ruling, Karnataka in the case of Giriraj Renewables Pvt. Ltd. 2018 (17) G.S.T.L. 156 (App. A.A.R. - GST) = 2018 (9) TMI 1341 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA. In the said case, the issue was relating to EPC contract entered for solar power project wherein the authority has recognized the concept of divisibility and pronounced separate treatment for taxability of supply of PV modules and supply of balance components and services. Amendments effective from 1 January 2019: Further, it is submitted that recently the Government has issued two notifications viz., Notification No.24/2018- Central Tax (Rate) dated 31.12.2018 and Notification No.27/2018-Central Tax (Rate) dated 31.12.2018 amending earlier Notification No.1/2017- Central Tax (Rate) dated 28.06.2017 and Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 respectively. Through the above amend....
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....racts shall not in any way dilute the responsibility for successful completion of the facilities, achieving the guaranteed performance of the plant, proper O&M of the plant after final acceptance by the corporation, etc as per the tender specification and a breach in one contract shall automatically be construed as a breach of the other contracts which will confer a right on the corporation to terminate other contracts also at the risk and the cost of the supplier". In the instant case, "The cross fall breach clause" as mentioned above establishes the indivisibility of the contract and reinforces the conditionality that all the three contracts in unison obligate the applicant to take up all activities i.e., end to end setting up of Solar Power Plant right from procurement of equipment to Erection and Operation & Maintenance of the same. The details are as under i. Supply Contract; ii. Erection Contract; and iii. Operation and Maintenance Contract. i) Supply Contract: Design, Engineering, Manufacture/ Procurement Testing at manufacturer's works, Inspection, Supply, Packing and Forwarding of all plant and equipment including Mandatory ....
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.... " means 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 (whether as goods or in some other form) is involved in the execution of such contract; Now the issue under question is whether the composite supply of the applicant would fall under works contract or not. As per Sec 2(119) of the CGST Act works Contract in itself is a composite supply in which construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc., are involved satisfying two conditions, wherein one is "transfer of property in goods" and the other is "the aforesaid activities being under taken on immovable property". There is no dispute in the first condition as it is evident that there is transfer of property in goods as per the agreement. Now we determine whether the activities are being under taken on immovable property. The term immovable property is not defined under GST Act. Section 3(26)of the Ge....
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....th notification no 11/2017 CT (Rate) dt:28-06-2017 as amended from time to time. In the present case, the contract entered by the applicant is composite supply of works contract as defined at Section 2 of CGST Act '2017 and APGST Act, 2017 and is treated as supply of service in terms of serial no.6, Schedule II of CGST Act '2017 and APGST Act, 2017. It falls under heading 9954, entry no. (ii) of S. No. 3 of the table of notification no. 11/2017 - Central Tax (Rate), Dated - 28th June 2017 as amended from time to time and corresponding notifications under APGST Act, 2017, and the applicable rate of tax is 18% (9% under Central tax and 9% State tax). The recent developments in the form of amendments to the GST Act i.e. amendments of the GST rate vide notification No. 24/2018 Central Tax (Rate) dated: 31.12.2018 and notification No.27/2018,-Central Tax (Rate) dated: 31.12.2018, amending earlier notifications No.01/2017,-Central Tax (Rate) dated: 28.06.2017 and notification No. 11/2017,-Central Tax (Rate) dated: 28.06.2017 respectively, which came into force from 01.01.2019, added clarity to the rate of taxation of the Solar Power Plant Projects as such. Against S.No.234 ....