TaxTMI 
TaxTMI 
2022 (2) TMI 1041
X X X X Extracts X X X X
X X X X Extracts X X X X
....-302019 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under:- (a) Classification of any goods or services or both: Further, the applicant being a registered person (GSTIN is 08BXFPG0701B1ZA) as per the declaration given by him in Form (ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT; STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS RAISED 1. M/s Utsav Corporation (hereinafter referred to as "applicant") is a proprietorship concern engaged in providing products and services in energy conservation, renewable energy sources, water infrastructure and water treatment project management. The applicant is engaged in supply of solar energy based products under various contracts, and on the basis of purchase orders from customers with or without installation service. 2. That the applicant is registered under GST as per the provisions of the GST law bearing GSTIN 08BXFPG0701B1ZA in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny goods or services or both: (b) applicability of a notification issued under the provisions of this Act: (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of lax paid or deemed to have been paid; (e) determination of the liability to pay lax on any goods or services or both: (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. 4. Thus, as per the said section, advance ruling may be sought by the applicant on the questions concerning classification of goods or services and determination of the liability to pay tax on goods or service. The applicant submits that the questions for determination in the instant advance ruling application concern (a) classification of goods or services and (b) determination of the liability to pay tax on goods or services. 5. Therefore, in the instant case the applicant is eligible to file the present advance ruling before the Authority for Advance Ruling. II. APPLICANT'S INTER....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or not assembled in modules or made up into panels; light-emitting diodes (LED) Under the GST tariff. SI. No. 234 of GST Tariff has a specific entry for Solar PV cells which is taxable at the rate of 5%. The entry is as under: S.No. HSN Description Rate 234. 84, 85 or 94 Following renewable energy devices & pails for their manufacture (h) Photo voltaic cells, whether or not assembled in modules or made up into panels 2.5% Hence there is no ambiguity in the classification of solar panels and it is clear that the same are taxable at 5% rate of GST. 2. Solar Pump A solar water pump is used for extracting water from ponds, rivers, borewells or other sources of water which are then used to meet the water requirements for irrigation, community water supply, livestock and other purposes. Pumps are also used for water transportation from one location to another. How does it work? When sunlight falls on the solar panels, it produces direct current (DC) which then feeds the DC motor to pump out the water, in the case where the motor requires an alternating current (AC), the DC produced by solar panels is converted to AC using an inverter/Variable Frequency Drive, and the motor ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilar phase. For example, considering the standards, a normal 1 Hp 3 phase electric pump will have voltage capacity of 415 volts but contrary lo that a 1 Hp 3 phase solar pump will have a voltage capacity of around 100-200 volts. The normal electricity flowing in state electricity grids is in form of Alternate Current with standard voltage as explained above. The solar pumps whether AC or DC have a low voltage capacity and hence in solar water pumping systems, solar pump sets are fitted with solar charge controllers to maintain the frequency of current supplied to them. Now there can also be a question whether Solar AC pumps can work on normal grid electricity in case of lack of sunlight or solar power. The answer to the question is given in FAQs at https://www.indiawaterportal.org/. "No lack of sunlight affects the working of solar water pumps On such days, however. a hybrid power supply can be given to the pump The pump can be connected to the state electricity grid or a diesel generator set after making proper adjustments in the controller. but such an arrangement should be made only after consulting the manufacturer of the solar water pump.'' Hence it is clear fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mp operates at its maximum performance levels and (ii) the pump will operate in less-than-perfect sun conditions, when sun rays are not available at required frequency such as on night time or cloudy days. Solar charge controllers regulate the energy flowing from the PV array and to perform such function, they consist of following components and technology:- - Variable Frequency Drive - Maximum Power Point Tracker (MPPT) - Enclosure for Controller With the variable voltage and frequency of solar power from PV array, solar drive converts the DC voltage input to AC output. In the MINISTRY OF NEW AND RENEWABLE ENERGY (MNRE) Guidelines referred above, MPPT is defined as under: Maximum Power Point Tracker (MPPT) - MPPT is an algorithm that is included in the pump controller used for extracting maximum available power from SPV array under a given condition. The voltage at which SPV array can produce maximum power is called 'maximum power point' voltage (or peak power voltage). A maximum power point tracker (MPPT) can be installed between the Solar pane! array and the pump motor to match the array's output with the required current or voltage of the motor to be op....
X X X X Extracts X X X X
X X X X Extracts X X X X
....b) Solar power based devices (c) Solar power generating system Hence, applicant is of the view that solar controllers are essentially parts for manufacture of Solar Water Pumping System which is covered under entry 243 being "Solar Power Generating System' or 'Solar Power based device'. 4. Structure Iron structures are used for mounting of PV modules in a solar water pumping system. As per MNRE Guidelines for Specification for Solar Photovoltaic Water Pumping Systems, the PV modules should be mounted on metallic structures of adequate strength and appropriate design, which can withstand load of modules and high wind velocities up to 150 km per hour. The support structure used in the pumping system should be hot dip galvanized iron with minimum 80 micron thickness according to IS 4759. To enhance the performance of SPV water pumping systems arrangement for seasonal tilt angle adjustment and three times manual tracking in a day should be provided. In order to make structure rigid, the gap between Telescopic partem supports should be minimal, further, for bearing of center load of whole structure only pins should be used instead of threaded bolts. As far as general ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able for specified number and weight of panels to be mounted thereon for the manufacture of solar pumping system. A sample PO for Water Supply Solar Pump Mounting Structure of Galvanized Iron for 8 panels and weight of 1280 kg is enclosed for your reference and marked as Annexure-4. Hence it is clear that the structures in the given case are suitable for use solely with a particular kind of machines, i.e. Solar Water Pumping System. Relevant to the point here, in the case of M/s Phenix Construction Technology vs. Commissioner of Central Excise & Service Tax, Ahmedabad-II [2017-TIOL-3281-CESTAT-AHM], the point of dispute was that whether structures and part of structures would qualify as components of the solar power plant. Hon'ble CESTAT held that items in question definitely be considered as 'components' of the reflector. Undisputedly used being required for initial setting up of a solar power generation project or facility, hence eligible to the benefit of exemption Notification No.15/2002CE dt.27.02.20010, as amended." As relied upon in the above judgment also. MNRE Guidelines for Specification for Solar Photovoltaic Water Pumping Systems dated 17.7.2019 specifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of:- * Pump Set (having AC or DC motor) * Solar Photo Voltaic (SPV) Array (made up of Solar Panels/Modules) * Solar Controller (SPV Controller) * Module Mounting Structures. Solar Panels: Photovoltaic Cells arranged in form of panels or modules to produce required solar energy. Solar Controller: Controller with Variable Frequency Drive with Maximum Power Point Tracking technology to regulated voltage of solar energy produced by Solar Panels and maximized use of solar energy available. Solar Pumps: Direct Current (DC) or Alternate Current (AC) Solar Pumps with low design voltage apt for being run by solar energy. Structure: Structure specifically designed for use solely with Solar Water Pumping System according to specific number of panels and weight of the panel array in the pumping system. A sample proposal given by the applicant to a prospected customer as quotation for Solar Pumping System has been enclosed as Annexure-5. The characteristics, technical design and specifications of these parts itself indicate that they are intended to contribute together for manufacture of a Solar water pumping system which is solar power based device. The applicant is awarded with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ping system like Heading 8413 for Pumps, heading 8504 for Controller etc., by application of Rule 3(a). each heading has to be regarded as equally specific in relation to Solar pumping system and one of them cannot be said to have most specific description as per Rule 3(a). Since each Heading is specific as per Rule 3(a). such composite goods cannot he classified by reference to 3(a), hence Rule 3(b) needs to be applied As per Rule 3(b). mixture or composite goods consisting of or made up of different components shall be classified as if they consisted of the material or component which gives them their essential character. The essential character of Solar Water Pumping System is attained by the pump sets. The essential function of the Solar Water Pumping System is to pump water from its source and this essential character of the system is satisfied by the pump sets. Hence as per application of Rule 3(b), Solar Water Pumping System should be classified as pump under Heading 8413. In addition to the above Rules of interpretation. Note 4 of Section Notes to Section XVI of Customs Tariff further requires the classification in this manner, which is read as under: 4. Where a machin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (180) ELT 481 (Tri - Delhi), the case of the appellant was that a Dusk Dawn System which is an electronic system for street lights comprising of electronic controller and Solar Photovoltaic Module should be entitled for benefit of notification being a Solar Power Generating system or not. The above judgment has been enclosed as Annexure-6. The contention of the appellant was that whole system works on the solar energy and it is an energy saving device used for automatic switching off the street lights making proper use of grid power and increasing the life of the lamps by operating the street light from sunset to sunrise. The contention of the Revenue is that whole system is not on the solar power generating system. Only one pail of the system i.e SPV module, can be called as 'Solar Power Generating System'. The other part of the SPVDDS is application part where the power generated by the SPV module is consumed by which the Dusk Down System functions. Hon'ble Delhi Tribunal held as under: 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 cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ystem itself is the composite supply since the intention of the recipient is very clear that he has to procure a Solar Water Pumping System as a whole. Further, in ease of Aura Solar recently a judgment has been delivered by Mumbai Tribunal in the context of Excise where it has said then when goods are sold as a package and can be proved through a technical opinion that it is a solar power generating system then exemption cannot be denied. The relevant extract of judgment is as under: CESTAT extends exemption to "Solar Power Generating System'' or "Solar Photovoltaic Lantern" in respect of clearance of solar lanterns under a single pack; Finds vivisection of the package to classify a part of such package and deny exemption in respect of one lamp as "neither justified nor having any basis in law"; Pursuant to investigation, Revenue alleged that assesses cleared portable lamp (in sets of two lamps) by projecting the same as "solar lantern" in their invoices & other documents to fraudulently avail exemption under Notification No 6/2002-CE as applicable to 'Non-conventional energy devices'; Observes that (i) manner in which the goods were being cleared was in a pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpugned item can be considered as solar power generating system and is entitled for the benefit of the exemption Notification. Therefore, we allow the appeal with consequential relief The above judgment has been enclosed as Annexure-9. The parts intended to be sold by applicant are designed to be solely used for solar water pumping system with required technologies and components (like low voltage pump solar pump sets, Controllers with MPPT algorithm technology) which are usable for solar water pumping system only. Hence these parts are undoubtedly for manufacture of Solar Water Pumping system only. Further, as explained and enumerated above, all these parts fall under Chapter 84 or 85 of Customs Tariff read with application of relevant Section Notes. Being parts for manufacture of Solar water pumping system i.e. a Solar Power Generating System and falling under Chapter 84 or 85, all these parts or any combination of them being intended to be sold by the applicant must be classified under Entry 234 of Notification No. 01/2017 - CT(Rate) dated 28.06.2017 i.e. GST Tariff for Goods. Ques 2. Classification and GST rate on contract for Supply of Solar water pumping system as a who....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he purposes of this entry shall be as seventy per cent, of the gross consideration charged for all such supplies, and the remaining thirty per cent, of the gross Consideration charged shall be deemed as value of the said taxable service" 6. Similarly, the GST rates on services have been notified by the Government in Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 which has been amended by various notifications and the relevant extract of the said notification (as amended up to date) for the present issue is reproduced as under: (1) (2) (3) (4) (5) "38 9954 or 9983 or 9987 Service by way of construction or engineering or installation or other technical services, provided in relation of setting up of following, - 9 -" (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 II. Section 3. Su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ended entries 234 and 34 ibid, we find that the benefit is available only when the Solar Power based devices' i.e. the System is supplied along with other goods and Services, one of which being a taxable service specified in the entry at S. No. 38 ibid. we find that a standard Solar Energy based bore well water pumping system comprises SEE panels. Structures. Storage lank, Controller. Pipe and Cables The Appellant is also adding De-fluoridation unit (DFU) and also accomplishing the task of installation, commissioning, operation and maintenance of the System including DFU. DFU qualifies for other goods while Installation and Commissioning of the System are the Services which are not only taxable but are also being provided m relation to setting up of the System, a requirement of the 'Explanation' to entry No. 234 ibid and entry No. 38 ibid. Thus, we find that the condition precedent to availment of the benefit of these entries ie, "supply of other goods and Services also, one of which should be a taxable service specified in the entry' No. 38", stands fulfilled. Copy of above Advance Ruling enclosed and marked as Annexure-11. 12. Farther, in case of Premier Solar S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n to the contracts/orders of pure sale of solar energy devices, the applicant is willing to seek an advance ruling for classification and GST rate on supply of solar energy products as Solar Water pumping system as a whole, sale of one of the products on standalone basis, and sale of the products under various combinations to be undertaken by them. 3. That this Advance Ruling is sought from the Authority for Advance Ruling, Rajasthan in respect of the following question:- 1) What should be the classification and GST rate on sale of following goods or combination of goods: a) Solar Pump b) Controller c) Structure d) Solar Water Pumping System (comprising of Solar panel + Controller + Solar Pump + Structure) e) Solar panel + Solar Controller + Solar Pump f) Solar Pump + Solar Panel g) Solar Pump + Controller h) Solar Panel + Controller 2) . What should be the classification and GST rate on Supply of Solar water pumping system as a whole comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation of Solar water pumping system for drinking water application? Now, we will discuss the issues raised one by one. Solar pan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e under Chapter 84 are as under: S. No. HSN Description Rate 234. 84, 85 or 94 Following renewable energy devices & parts for their manufacture 2.5% (b) Solar power based devices (c) Solar power generating system Entry 234 of Scheduled, specifically covers the parts for manufacture of 'Solar Power Generating System' or 'Solar Power based devices'. Hence, solar pump is solar power based devise and is classifiable under SI. No. 234 of Notification No. 01/2017-CT(Rate) dated 28.06.2017 and taxable at the rate of 5% GST. Controller: - Solar Controller - Solar Controller is technically known as a Charge controller. It determines how' much power should be injected into the batteries for optimum performance. It measures the efficiency of the entire system as well as the operating life of the batteries. It also protects the battery bank from overcharging. Whenever a battery is used, a charge controller is also used to ensure longer battery life. The above item i.e. controller is neither solar power based devise nor part of solar power based devices and fall under chapter heading 85 of GST Tariff which has a specific entry for Electrical transformers, stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any other. It shall not be a mixed supply if these items are supplied separately; Further, tax liability on a mixed supply shall be determined as defined in Section 8 (b) of GST Act, 2017 which is as under- "a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of lax." Therefore, the Solar Water Pumping System (comprising of Solar panel + Controller + Solar Pump + Structure) is a Mixed Supply and highest rate of GST will be applicable amongst goods supplied by the applicant.- Solar panel + Solar Controller + Solar Pump Solar Pump + Solar Panel Solar Pump + Controller Solar Panel + Controller Since the above composition is the mixed supply of goods, as already discussed in above para, hence the highest rate of GST will be applicable amongst goods supplied by the applicant. 4. Now we will discuss the second question as under: - Q. What should be the classification and GST rate on Supply of Solar water pumping system as a whole comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation of Solar water pumping system for drinking water applicat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....teration or commissioning etc. are involved along with transfer or property in goods. b. Under GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting out. improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property, only then it will be classified as works contract. 2. Further, we observe that the supply, supplied by the applicant i.e comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation is a composite supply of works contract, and the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017. as amended from time to lime. The relevant portion of the S. No. 3 (Heading 9954) (ii) of the Notification No 11/2017-CT (Rate) dated 28.06.2017 (as amended) is as under: - S.No. Chapter, Section or Heading Description of Service CGST Rate % 3 Heading 9954 (Construction services) (ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017. 9 In view of the above, we find that the pro....