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2018 (9) TMI 693 - AAR - GSTWorks Contract - Supply of goods or services - Turnkey EPC Contract - contract for Erection, Procurement and Commissioning of Solar Power Plant - Whether contract for Erection, Procurement and Commissioning of Solar Power Plant shall be classifiable as Supply of Goods or Supply of Services under the provisions of the Central Goods and Services Tax Act 2017 and Rajasthan State Goods and Services Tax Act 2017? If answer to the above question is supply of goods, then under which HSN Classification the said supply of solar power plant would fall and what shall be the rate of tax on it in accordance with the N/N. 01/2017-Central Tax 28-06-2017? - If the answer to the above question is supply of service, then under which HSN Classification the said supply of solar power plant would classify and what shall be the rate of tax in accordance with the N/N. 11/2017-Central Tax (Rate) ,dt. 28-06-2017? Held that:- Reliance placed in decision of M/s. T.T.G. Industries Ltd., vs Collector of Central Excise, [2004 (5) TMI 77 - SUPREME COURT OF INDIA] - The Hon. Supreme Court while holding the machines as immovable property took into account facts such that the machines could not be shifted without first dismantling it and then re-erecting it as another site. It was also sought to distinguish as to how a concrete base meant just to prevent wobbling of the machine would not place the machine in the category of 'immovable property' as something attached to the earth. 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 - The output of the project i.e. power, would be available to an identifiable segment of consumer. Thus this output supply 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 - The Solar Power Plant cannot be shifted to any other place without dismantling the same. Further it is a tailor made system which cannot be sold as it is to the other person - Solar Power Plant includes civil work such as development of site, structure Structure for 110kv transmission , building cable trenches, foundation, 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. Civil structure cannot be dismantled and moved. Schedule II of Scope of work of Composite EPC Contract, clearly states that the “design and engineering of the project should be such that it is consistent with a design life of at least 25 years from the COD (commissioning date).” The applicant has himself agreed to be bound by this clause which reflects permanency of the instant Solar Power Plant. Contract between an EPC contractor and the counter-party is entered into on the premise that the plant would continue to be situated at the place of construction. The impugned 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 clause (119) of section 2 of the GST Act - Since the impugned transaction for EPC Contract for the Solar Power Plant is a works contract under section 2(119) as supply of services hence question of principal supply does not arise and so GST tax rate of Solar power Generating System under notification No 01/2017-CT (Rate) dated 28.06.2017, at S. No. 234, under HSN Classification 84, 85 and 94 is not applicable. Ruling:- “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) dated 29 June, 2017. EPC Contract for Solar Power plant comes under the purview of Works Contract as per Section 2(119) of GST Act - The contract for Erection, Procurement and Commissioning of Solar Power Plant falls under the ambit “Works Contract Services” (SAC 9954) of Notification no. 1 1/2017 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, aggregating to 18%.
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