The Applicant  is engaged in supply of solar power generating system and  its installation at the site. He stated that installation of solar power generating system should not be considered as works contract so as to attract GST rate of 18% but should regarded as “System” as the installation is ancillary to the principal supply of solar power generating system. Consequently, the GST rate applicable to the solar power generating system being 5% should be considered and not the GST rate applicable for works contract services.

The Applicant sought Advance Ruling on "Applicable GST Rate on supply of Solar Power Generating System.”

The installation of the Solar Power generating system has a permanent location as it is meant for onward sale of power to the consumer. The output of the project i.e. Electricity would be available to an identifiable segment of consumer would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the plant elsewhere at frequent intervals.

Further Installation of solar power generating system necessarily includes civil work such as development of site, structure foundation, 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.

Therefore the impugned transaction for EPC Contract for the Solar Power generating system which includes engineering, design, procurement, supply, development, testing and commissioning is a “works contract” in terms of clause (119) of section 2 of the GST Act  hence question of principal supply does not arise and is taxable as works contract service @ 18% vide Notification no. 11/2017 Central Tax (Rate).

CRUX: The nature of work is of Erection, Procurement and Commissioning of Solar Generating System which falls under the ambit “Works Contract Services” (SAC 9954) of Notification no. 11/2017 Central Tax (Rate) dated 28 June, 2017 and shall attract 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts, aggregating to 18%.