Mr. DINESH KUMAR AGRAWAL

The Applicant is an unregistered taxpayer, is engaged in erection and supply of solar power generating system by making an agreement with his customers.

The Applicant has sought Advance Ruling on following issues:

1) Whether supply of solar power plant under ‘Turnkey EPC Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017?

2)  Whether supply of solar power plant under ‘Other EPC Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017?

3) Whether supply of solar power plant under ‘Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017 where the assembly, erection, and commissioning of the solar power plant is undertaken by the Applicant under a separate contract?

4) Whether supply of solar power plant under ‘Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017 where the assembly, erection, and commissioning of the solar power plant is undertaken by a third party contractor?

5) Whether supply of solar power plant under ‘Balance of Plant Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017?

6) What would be nature of supply i.e. composite supply or mixed supply?

7) Whether contract for assembly, erection, and commissioning of the plant undertaken by the Applicant under a separate contract would be a service contract liable to be taxed under Service heading 9954?

8) Whether the time of supply of power plant shall be determined under Section 31 (4) of the CGST Act/SGST Act read with Section 12(2) thereof?

Entry number 234 of Schedule I (which are taxable @ 2.5%) of Notification No. 1/2017-Central Tax (Rate), dated :28th June 2017, is relevant to the Issues raised by applicant

Further, as per Explanation (iii) of the said Rate Notification, chapter heading shall mean chapter heading as specified under the First Schedule to the Customs Tariff Act, 1975.Chapter Heading 8501 includes Electric motors and generators. As per HSN Explanatory notes to heading 8501, the heading covers photovoltaic generators consisting of panels of photocells combined with other apparatus e.g. storage.

As per section 31 (4) “In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received”.

As per Section 12(2) “The time of supply of goods shall be the earlier of the following dates, namely:-

(a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or

(b) the date on which the supplier receives the payment with respect to the supply-

Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount.

Crux:

1 & 2) The scope of work in respect of “Turnkey EPC Contract” and “Other EPC Contract” includes civil works, procurement of goods and erection and commissioning. Accordingly, “Turnkey EPC Contracts” and “Other EPC Contracts” are not getting covered under supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017.

3) The applicant sought a clarification on the liability of division of contract in two, one is supply of material and other one is erection, commission and there on., in this regard it is opined that, it depends upon the terms and conditions of the agreements as to whether the split of contract is an artificial and colorable device to avoid the legitimate tax or the requirement of the contractee demands separation of contract for better execution. In case the contract is an artificial split, the Clarification for Issue 2 is applicable. In other case the rate of tax applicable for the supply of goods subject to condition of eligibility of being “device and parts ” of the solar power generating system attracts 5% rate of tax as per Entry 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28th June, 2017. And the supply of service attracts at the rate specified thereon in Notification No. 11/2017 -Central Tax (Rate).

4) The goods are supplied by one contractor, and the services were supplied by the other contractor. Therefore the rate of tax applicable for supply of goods as long as it satisfies the condition of being ” device and parts” of the solar power generating system attracts 5% rate of tax as per Entry 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28th June, 2017.

5) The nature of transaction falls under composite transaction as both the goods and services are naturally bundled. Even though the primary commodity has been supplied by the customer, the ancillary goods for the purpose of service are to be supplied by the applicant only. The principle supply in this context is supply of service and the ancillary goods supplied are in conjuction with the services provided. Hence the rate of tax applicable in such transaction is liable at the rate as per the Entry 25 (Heading 9987) of Notification No. 1/2017-Central Tax (Rate), dated : 28m June 2017, and attracts 18% rate of tax.

6) Ruling covered under clarification in issue number 5

7) The referred contract doesn’t fall under the ambit of SAC 9954, but falls under the Entry 25 of 25 (Heading 9987) of Notification No. 11/2017 -Central Tax (Rate), dated: 28th June 2017, and attracts 18% rate of tax.

8) Yes, the time of supply of power plant shall be determined under Section 31 (4) of the CGST Act/SGST Act read with Section 12(2) thereof.