TMI Blog2019 (11) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is that for the period up to 31.12.2018 the EPC contract is required to be considered as a works contract and has to be taxed accordingly. The artificial vivisection into two contracts, as envisaged, shall not rob the contract of its essential nature of a works contract. Whether parts supplied on standalone basis (when supplied with PV modules) would also be eligible to concessional rate of 5% as parts of solar power generation system?- HELD THAT:- Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 provides that items covered under Chapters 84 or 85 which constitute renewable energy devices and parts required for their manufacture are covered under the aforesaid entry no. 234 and are liable to be taxed at 5% - This essentially implies that those parts are liable to 5% tax only if they go into the manufacture of the Solar power generating system. Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors? - HELD THAT:- Entry No. 234 in Schedule I to Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 does not differentiate between supplies by the contractor or the sub-contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribe them as the suppliers engaged the design and setting up of solar power plants owned by a separate entity. Since the agreements hold the various elements of the nature of supply, the Authority is proceeding in the matter considering the applicant as a supplier in terms of the agreements submitted by them. 3. In Exhibit - II, para 4, of the application Solarys states that as part of setting up of solar power plants they enter into contracts with various Project Developing Companies ( EPC Contractors ) for various activities i.e. (a) for offshore/ onshore supply of works services and Importation of goods, (b) separately for supply of goods for supply of services. Subcontractors may also be appointed for civil works by the EPC contractors. 4. The applicant claims that the following two scenarios arise in this context: i. All Goods may be supplied by the EPC Contractor : In this case, entire contract is executed by the EPC contractor and all goods required are supplied by the contractor (including PV modules) ii. Certain goods supplied by the EPC contractor : In this case, modules may be procured directly by Project Developer and balance goods would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling facilities and Mandatory spares. d. The various services provided, as part of services contract, include (i) Construction of complete building including control rooms inverter rooms, roads drainage system, boundary walls / fencing, borewells, (ii) All civil and foundation works for switchyard, solar plant all other equipment, (iii) Site enabling facilities, (iv) Leveling grading and (v) Erection, Commissioning and testing for solar modules, mounting structures, power transformers, inverters, SCADA, complete switchyard, inverter transformers, connectors, earthing lines etc., The applicant also provided a diagrammatic illustration of the solar power system. 4. The applicant, in Exhibit Ill to the application, has furnished their understanding of rate of tax / exigibility in respect of the impugned transaction, on the basis of the following grounds: 4.1. Legal provisions and applicability 4.1.1 Rate of solar power generating system Under GST regime, various rates have been prescribed for goods and services. Per, Notification No. 1/2017-Integrated tax (Rate) dated 28 Jun 2017, solar power generating systems and parts for their manufacture are tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there are separate contracts for supply of goods and services, the taxability should be as under: Contract for goods wherein solar PV modules are also supplied - Entire contract should qualify as supply of solar power generating system and should be taxable at 5% Contract for goods wherein solar PV modules are not supplied - In such case, the goods which qualify as parts of solar power generating system and are covered under heading 84,85 or 94 should be eligible to concessional rate of 5% Contract for Services - Entire contract would be service contract taxable at 18% 4.2. Meaning of term Solar Power generating system and applicability when all goods (including PV modules) are supplied 4.2.1 The term solar power generating system has not been defined under GST. Solar power generating systems generally are the systems which absorb sunlight and convert it into electricity which can be put to further use. 4.2.2 Solar power system has been defined under Solar Power - Grid connected Ground Mounted and solar Rooftop and metering Regulation 2014 issued by State of Goa. Solar power system as per the regulation means a grid-connected solar generating s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is possible to convert solar energy to electricity with the help of inverter charger manufactured by the appellants. The Dy. General Manager has certified that the inverter merger constitutes solar power generating system as it performs the function of generating the required high frequency AC power from in-light with, the help of SPV module and supplying it to the compact fluorescent lamp of a solar lantern. In view of the above, expert opinion, we hold that e impugned 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. 4.2.8 In M/s. Phenix Construction Technology Vs. Commissioner of Central Excise Service Tax, Ahmedabad-II [2017-TIOL-3281-CESTAT-AHM] = 2017 (8) TMI 307 - CESTAT AHMEDABAD the question under consideration was whether the structures and parts of structures cleared for initial setting up of solar power plant are eligible for the benefit of Notification of 15/2010-CE. The point of dispute in the said case law was that whether the aforesaid goods would qualify as components of the solar power plant. Hon ble CESTAT has decided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the principal supply is providing a solar power generating system and hence, entire supply contract (which would include PV modules as well as all other goods) should be taxable at 5% as Solar Power Generation System It is further submitted that Ministry of New and Renewable Energy ( MNRE ) in various instances has also approved entire BOQ consisting of various parts e.g. cables, module mounting structures, spares etc., as essential to solar power generating system and hence the concessions applicable have been extended to such parts. Drawing a corollary, concessional rate of 5% should be applicable on all the goods approved under BOQ by MNRE as well. 5. Taxability of parts of solar power generating system: 5.1 In certain cases, not all parts of solar power generating system are supplied by EPC contractors (as some parts may be procured separately). For example, PV modules may be procured by the Project Developer directly and balance contract is awarded to EPC contractor for supply of remaining goods. In such case, even though the entire contract may not qualify as solar power generating system, the parts supplied should be eligible to concessional rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue involved in the case was whether power cables, earthing cables, wind farmer computer will be eligible for benefit of exemption under Notification 64/94-Cus. The Tribunal held that power cables and control cables together form part of inside cabling of wind turbine controller, since, control cables are eligible for exemption, the benefit of exemption has to be extended to power cables also. In Pushpam Forging vs CCE, Raigad [2006 (193) ELT 334 (Tri.-Mum)] = 2005 (7) TMI 242 - CESTAT, MUMBAI , the Tribunal held that flanges are parts of windmill tower which is in turn a part of Wind Operated Electricity Generators (WOEG). Once tower is accepted and held to be a part of WOEG, flanges of the tower will be a part of the whole Wind Operated Electricity Generator. In CCE Vs Megatech Control Pvt. Ltd., [2002 (145) ELT 379 (Tri. Chennai)] = 2002 (5) TMI 112 - CEGAT, CHENNAI , the Tribunal held that control panels are part of wind operated Electricity Generators and are meant specifically for wind mill and will be eligible for benefit. Vide Circular No. 1005/ 15/2015-CX dated 20.10.2015, the CBEC had clarified that tower, nacelle, rotor, wind turbine controller, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to all suppliers providing such products as long as it can be established (through certification or otherwise) that these are to be used in solar power generating system. This would also be in line with practice under erstwhile excise law wherein benefit was extended to sub-contractors also through MNRE certification. 7. Taxability of Contract for services: 7.1 A separate contract is awarded to the EPC contractor for provision of services which consists of the following: Construction of complete building including control rooms and inverter rooms, roads and drainage system, boundary walls / fencing, bore wells All civil and foundation works for switchyard, solar plant and all other equipment Site enabling facilities Leveling and grading Erection, Commissioning and testing for solar modules, mounting structures, power transformers, inverters, SCADA, complete switchyard, inverter transformers, connectors, earthing lines etc. 7.2 The applicant further submits that such a contract is a separate contract for services itself and hence, has to taxed on independent basis. In our understanding, the same should be analysed independent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply of services; the developer may procure main parts of the solar power generating system (PV modules) on their own which attract 5% and remaining parts may be supplied by contractor which also should attract 5%; in case the contractor supplies all the material / goods including PV modules, the rate should be 5% and requested for adjournment for submission of the copies of model contracts. 10. The authorized representative of the applicant appeared again and hearing proceedings were held on 09.02.2018. 11. The representative furnished the copies of model contracts along with the chartered engineer s certificate and pleaded that both the contracts are independent and there was no connection between the two contracts; no maintenance contract had been entered; GST @ 18% was being paid on the services contract; on supply of goods GST was being paid @5% for all parts as per entry 234 of Notification No. 01/2017-Integrated Tax (Rate). FINDINGS DISCUSSION: 12. We have gone through the application filed by M/s. Solarys Non-Conventional Energy Private Ltd., (the Applicant), the issues/ transaction(s) involved on which advance ruling is sought by the applicant, relevant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff item Description of Goods 234 84 or 85 Following renewable energy devices parts for their manufacture (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) Solar lantern / solar lamp (g) 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, Subsection (i) dated 28th June, 2017 vide GSR number 673(E) dated 28th June, 2017. The explanation to the entry provides that the changes have to be read in conjunction with serial number 234 of Schedule I of Notification No. 1/2017- Central Tax (Rate). Entry 38 is effective from 01.01.2019. 15.2 A conjoint reading of the two aforementioned Notifications requires that after 01.01.2019 the supply is taxable on the values worked out separately for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional solar power plant with the attending guarantees and warranties related to its proper functioning, be it in relation to goods or the services performed. Artificial vivisection of the goods and services aspects of the singular contract would run contrary to the spirit of the contract. The supply of goods and the related services are so intricately connected that the same cannot be bifurcated by reasonable means. The execution of this contract involves the transfer of property in goods. 16.3 In the light of these facts we examine the definition of works contract as provided in Section 2(119) of the CGST Act, 2017. It defines works contract as a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. The contract is for the engineering, procurement and commissioning of the solar power generating system and what is transferred is the entire power generating system including the civil works in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Following renewable energy devices parts for their manufacture (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) Solar lantern / solar lamp (g) Ocean waves/ tidal waves energy devices/ plants The Notification provides that items covered under Chapters 84 or 85 which constitute renewable energy devices and parts required for their manufacture are covered under the aforesaid entry no. 234 and are liable to be taxed at 5%. This essentially implies that those parts are liable to 5% tax only if they go into the manufacture of the Solar power generating system. 18. The third question is whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to subcontractors. Entry No. 234 in Schedule I to Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 does not differentiate between supplies by the contractor or the sub-contractor. It provides that as long as the goods falling under Chapter 84 or 85 are the list ..... X X X X Extracts X X X X X X X X Extracts X X X X
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