The Applicant is engaged in business of developing power projects in India. It is undertakes development, design, engineering, supply, installation, testing and commissioning to establish solar power plant at various states in India. It will undertake itself in executing ‘Engineering Procurement and Commissioning “EPC” contacts for Solar Power Generation System commonly known as “Solar Power Plants”. The plant is effectively movable and can be reinstalled on any other piece of land.

The Applicant has sought Advance ruling on "Whether Supply of Solar Power Plants is considered as supply of goods or supply of services"?

The Solar Power Plant is a big project and has a permanent location as it is meant for onward sale of power to the consumer. Such plant would therefore have an inherent element of permanency. It cannot be shifted to any other place without dismantling the same as it includes civil work such as development of site, structure foundation, Structure for 110kv transmission , building cable trenches, civil work relating to invertors and control buildings, store rooms , canopies and such other civil structure and related activities as set out in Scope of work and the Technical Specifications. Further it is a tailor made system which cannot be sold as it is to the other person.

It is submitted that the scope of work in respect of “Turnkey EPC Contract” includes civil works, procurement of goods and erection and commissioning. Accordingly, “Turnkey EPC Contract” 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). EPC Contract for Solar Power plant comes under the purview of Works Contract as per Section 2(119) of GST Act.

CRUX:  The transaction for EPC Contract for the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and commissioning is a works contract” in terms of section 2(119) of the GST Act as supply of services.

The contract for EPC of Solar Power Plant falls under the ambit ” Works Contract Services” ( SAC 9954 ) of Notification no. 11/2017 Central Tax (Rate) dated 28 June, 2017 and attracts 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts.