TMI Blog2022 (2) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... of Schedule-I of GST Tariff has a specific entry for Solar PV cells which is taxable at the rate of 5%. Solar pump - HELD THAT:- The solar pumps whether AC or DC have a low voltage capacity and hence in solar water pumping systems, solar pump sets are fitted with solar charge controllers to maintain the frequency of current supplied to them - Entry 234 of Scheduled, specifically covers the parts for manufacture of 'Solar Power Generating System' or 'Solar Power based devices' - Hence, solar pump is solar power based devise and is classifiable under SI. No. 234 of Notification No. 0172017 - CT(Rate) dated 28.06.2017 and taxable at the rate of 5% GST. Solar Controller - HELD THAT:- Solar Controller is technically known as a Charge controller. It determines how' much power should be injected into the batteries for optimum performance. It measures the efficiency of the entire system as well as the operating life of the batteries. It also protects the battery bank from overcharging. Whenever a battery is used, a charge controller is also used to ensure longer battery life - controller is neither solar power based devise nor part of solar power based devices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the GST Act . The issue raised by Sapna Gupta M/s Utsav Corporation, Plot No. 15. S-l, Gurjar Ki Thadi, Shyam Nagar, Jaipur, Raj. -302019 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under:- (a) Classification of any goods or services or both: Further, the applicant being a registered person (GSTIN is 08BXFPG0701B1ZA) as per the declaration given by him in Form (ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT; STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS RAISED 1. M/s Utsav Corporation (hereinafter referred to as applicant ) is a proprietorship concern engaged in providing products and services in energy conservation, renewable energy sources, water infrastructure and water treatment project management. The applicant is engaged in suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, slating the question on which the advance ruling is sought. (2) The question on which the advance ruling is sought under this Act. shall be in respect of,- (a) classification of any goods or services or both: (b) applicability of a notification issued under the provisions of this Act: (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of lax paid or deemed to have been paid; (e) determination of the liability to pay lax on any goods or services or both: (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. 4. Thus, as per the said section, advance ruling may be sought by the applicant on the questions concerning classification of goods or services and determination of the liability to pay tax on goods or service. The applicant submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tovoltaic effect. The solar panels used in solar water pump systems produce electricity by using the photovoltaic effect. These solar panels absorb the sun's photons and convert them into energy. Classification of Solar panels in Customs tariff is under Heading 8541 which is as below: HSN Description 8541 40 Photosensitive semi-conductor devices, including photo voltaic cells whether or not assembled in modules or made up into panels; light-emitting diodes (LED) Under the GST tariff. SI. No. 234 of GST Tariff has a specific entry for Solar PV cells which is taxable at the rate of 5%. The entry is as under: S.No. HSN Description Rate 234. 84, 85 or 94 Following renewable energy devices pails for their manufacture (h) Photo voltaic cells, whether or not assembled in modules or made up into panels 2.5% Hence there is no ambiguity in the classification of solar panels and it is clear that the same are taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be technically understood here. Voltage is the amount of electrical pressure, which causes electricity to flow in the power line. Generally, in India, voltage in Single phase is 240 volts and voltage in 3 phase system is 415 volts. This is the general voltage of normal electric current. The important characteristic of solar pumps (whether DC or AC) is that it is designed with low voltage capacity to be run on solar energy. As compared to the above general standards, the voltage of solar power is lower. The solar pumps are designed to primarily run on solar energy. Hence the solar pump motors have a low voltage capacity as compared to electric pumps. Hence this is a differentiating factor of solar pumps that their voltage capacity is lower as compared to electric pumps of similar phase. For example, considering the standards, a normal 1 Hp 3 phase electric pump will have voltage capacity of 415 volts but contrary lo that a 1 Hp 3 phase solar pump will have a voltage capacity of around 100-200 volts. The normal electricity flowing in state electricity grids is in form of Alternate Current with standard voltage as explained above. The solar pumps whether AC or DC have a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the basis of above, applicant is of the view that the solar pump sets are solar power based devices and must be classified under SI. No. 234 of Notification No. 01/2017- CT(Rate) dated 28.06.2017 and be taxable at the rate of 5%. 3. Solar Controller In the Ministry of New and Renewable Energy (MNRE) Guidelines for Solar Water Pumping Systems for 2019-20 vide Annexure-l of Circular No. F. No. 41/3/2018-SPV Division dated 17.7.2019, SPV controller is defined as under: SPV Controller - Pump Controller converts the DC voltage of the SPV array into a suitable DC or AC, single or multi-phase power and may also include equipment for MPPT. remote monitoring, and protection devices. The power output of a solar array is used or manipulated by components to which it is connected. The controllers perform the function of regulating the frequency of current supplied into the device/system according to the voltage requirement of device/system to which it is connected. The Solar controller converts the DC power produced by the solar array to match the voltage and current operating requirements of the system's solar pump. It ensures that (i) the pump operates at its ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 2019-20 have been enclosed herewith and marked as Annexure-3). Since in the case of appellant the controllers comprise of Variable Frequency Drive (VFDs) with MPPT. it is apparent that these controllers are designed only for use in solar pumping systems. Hence, solar controllers are essentially parts for manufacture of Solar Water Pumping System. As far as classification of controllers in Customs tariff is concerned, the relevant Heading is as under: HSN Description 8504 Electrical transformers, static converters (for example, rectifiers) and inductors 8504 40 - Static converters: 8504 40 40 --- Voltage regulator and stabilizers (other than automatic) 8504 40 90 --- Other Hence the product is classifiable under Chapter 85 of Customs tariff. Now. the relevant entries in GST Tariff for pumps classifiable under Chapter 85 are as under: S.No. HSN Description Rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product in question are not general iron structures but 'Water Pumping System Mounting Structure'. They are parts of specific machines. Hence it is important to refer the Section Note according to which parts of machines are to be classified. Note 2 of Section XVI of Customs Tariff being relevant in the given case states as under: 2. Subject to Note 1 to this Section. Note / to Chapter 84 and to Note I to Chapter 85. parts of machines (not being parts of the articles of heading 8484, 8544. 8545. 8546 or 8547) are to be classified according to the following rides (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448. 8466, 8473. 8487, 8503, 8522, 8529. 8538 and 8548) are in all cases to be classified in their respective headings; (b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448. 8466, 8473, 8503, 8522. 8529 or 8538 as appropriate However, parts which are equally suitable for use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structures are parts solely for use in Solar water pumping system. Applying the above Section Note 2 to structures in the given case, these are parts not included in Chapter 84 or 85, so they out of (a) above. Thus structures are other parts and as per Note 2(b), since these structures are suitable for use only with Solar Water Pumping System having specific technical design and parameters for specified number of panels and weight etc., these structures are to be classified with the solar water pumping system only under Chapter 84. Hence the structures are classifiable under Chapter 84 of Customs Tariff by applicability of Section Note 2(b) to Section XVI of Customs Import tariff. Now for determining the GST rate on iron structures for solar pumping system sold on standalone basis, the relevant entry is as under: S. No. HSN Description Rate 234. 84, 85 or 94 Following renewable energy devices parts for their manufacture 2.5% (b) Solar power based devices (c) Solar power generating syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be regarded as supply of Solar Water Pumping System which of course qualifies as a 'Solar Power generating system' or 'Solar power based device'. This understanding is backed by a rule of interpretation that a heading of classification should be understood in a sense to include that article in unassembled or disassembled form also. Rule 2 of General Rules for the Interpretation of Customs Import Tariff is applicable here which provides as under: 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished articles has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled Rule 3 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. The solar pumping system is a machine which consists of individual components being the above products. As explained in detail above, these products are intended to contribute together to form a Solar Water Pumping system which has to perform the function of water pumping and pumps for handling water are classifiable under Heading 8413. Hence according to the Section Note 4. Solar Water Pumping System is classifiable under Chapter 8413. It is further submitted that the Solar pumping system sold by the applicant consisting of the individual components in unassembled form will still be included in Heading 8413 only as per Rule 2(a) which clearly provides that a reference to a heading should be taken to include a reference to that article presented in unassembled or disassembled form. Now as it is understood while classification of solar pumping system under Customs tariff that Solar Water Pumping system is in itself a product and being composite goods or machine consisting of individual components, it is classified as the essential character component i.e. pumps, the classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stem. Further, it has been understood above in detail that the Solar Pumping system comprising of the various components as listed above, is classifiable under Chapter 84 as and it is a renewable energy device being run on solar energy, hence it is classifiable as 'Solar Power based device' or 'Solar Power Generating system' and should be taxable under Entry 234 of Notification No. 01/2017-CT(Rate) dated 28.06.2017 i.e. GST Tariff for Goods, therefore taxable at 5% rate of GST. The above view has been confirmed by Authority for Advance Rulings of Uttarakhand in case of Eapro Global Limited where the applicant in exactly similar background and in relation to the same products, asked the following questions:- (a) Applicability of GST rate on supply of solar inverter, controller, battery and panels under Solar Power Generating System as a whole whether such supply be called as 'composite or mixed supply' (b) Supply of solar inverter solar panels together will fall under the definition of Solar Power Generating System or it will be a 'mixed supply' and the applicability of GST rate on supply of solar inverter solar panels toge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as solar lanterns and (iii) assesses did not sell the single lantern individually or separately; Remarks The classification of the goods need to be determined in the form and manner in which the same is cleared and not by unbundling/vivisecting the package into individual components to determine their classification ; Relying upon the technical opinion provided by HT, concludes that the assesses clears nothing but Solar Power Generating System or Solar Photovoltaic Lantern'' and the exemption claimed by the assesses in respect of same under SI No 237 of Notification No 6/2002-CE .... is admissible to the whole package : Mumbai CESTAT The judgment has been enclosed and marked as Annexure-8 Other Combinations:- 2. Solar Controller + Solar Pump + Solar panel 3. Solar Pump + Solar Panel 4. Solar Pump + Controller 5. Solar Panel + Controller The components sold by the applicant are all designed specifically and solely for use in a solar water pumping system. When these parts are sold in any combination as mentioned above, they are eventually intended for use in manufacture of a Solar water pumping system only. The com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contractor for work to be awarded from PHED department for designing, providing, installation, and commissioning of 84 Nos. Solar Energy based bore well water pumping systems, (with De-fluoridation unit of capacity 1000 LPH) including comprehensive operation and maintenance for a period of 7 years in various fluoride affected villages/habitations. 2. The main contractor is desirous of sub-contracting the execution of a part of the said project viz. Supplying, installation, commissioning including Operation and maintenance of Solar Energy based bore well water pumping systems. 3. Under the contract for 'Solar energy based bore well pumping system' the applicant has to provide the Solar Pumping Systems comprising of following goods:- Solar Panels Solar Pumps Solar Controllers Structure LED Lights 4, Along with the above goods, the applicant is responsible for carrying out the activities for installation and commissioning of the Solar energy based bore well pumping system at the respective sites. A sample proposal for scope of work for sub-contracting arrangement is enclosed and marked as Annexure-10 5. The GST rates on g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Solar power generating system (d) Wind mills. Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants devices (f) 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. Sub-section (i) dated 28th June, 2017 vide GSR number 673(E) dated 28th dune. 2017. 7. On a conjunctive reading and analysis of above entries in GST Tariff Schedule of goods and services, it comes to understanding that when goods under Entry 234 are supplied by a supplier along with other goods and services, one of which is taxable service under SI. No. 38 above, the value of supply of goods and value of supply of services has to be deemed as 70% and 30% of gross consideration respectively. The rate of GST on value of goods will be 5% and rate of GST on services will be 18%. 8. In the given case, applicant has to provide goods falling under SI. No. 234 of the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem are the Services which are not only taxable but are also being provided m relation to setting up of the System, a requirement of the 'Explanation' to entry No. 234 ibid and entry No. 38 ibid. Thus, we find that the condition precedent to availment of the benefit of these entries ie, supply of other goods and Services also, one of which should be a taxable service specified in the entry' No. 38 , stands fulfilled. Copy of above Advance Ruling enclosed and marked as Annexure-11. 12. Farther, in case of Premier Solar System Pvt. Ltd. reported in 2019-TIOL-79-AAR-GST. a ruling was sought (b) Whether the supply of solar irrigation water pumping systems along with design, erection, commissioning installation is a 'composite supply' and the applicability of GST rate? The Authority pronounced a Ruling that,- (i) Supply in question would covered under Solar Power Generating System as a whole in terms of serial no. 234 of Schedule-1 of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. (ii) Supply in question would be treated as composite supply . (ii) 70% of the gross value of supply in question shall be the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troller c) Structure d) Solar Water Pumping System (comprising of Solar panel + Controller + Solar Pump + Structure) e) Solar panel + Solar Controller + Solar Pump f) Solar Pump + Solar Panel g) Solar Pump + Controller h) Solar Panel + Controller 2) . What should be the classification and GST rate on Supply of Solar water pumping system as a whole comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation of Solar water pumping system for drinking water application? Now, we will discuss the issues raised one by one. Solar panels: - Solar Panels (also known as Photovoltaic/PV Panels ) are made of solar cells (also known as PV cells ) which are connected to each other in series and parallel connection. Solar cells are made up of silicon semi-conductor material which converts the energy generated from sunlight into electrical energy. The electrical energy generated by conversion of sunlight is known as Solar power. Solar PV modules/panels are to be positioned at proper inclination to collect maximum energy from the sunlight. Under the GST tariff, SI. No. 234 of Schedule-I of GST Tariff has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g system Entry 234 of Scheduled, specifically covers the parts for manufacture of 'Solar Power Generating System' or 'Solar Power based devices'. Hence, solar pump is solar power based devise and is classifiable under SI. No. 234 of Notification No. 01/2017-CT(Rate) dated 28.06.2017 and taxable at the rate of 5% GST. Controller: - Solar Controller - Solar Controller is technically known as a Charge controller. It determines how' much power should be injected into the batteries for optimum performance. It measures the efficiency of the entire system as well as the operating life of the batteries. It also protects the battery bank from overcharging. Whenever a battery is used, a charge controller is also used to ensure longer battery life. The above item i.e. controller is neither solar power based devise nor part of solar power based devices and fall under chapter heading 85 of GST Tariff which has a specific entry for Electrical transformers, static converters and inductors as under: - HSN Description Rate 8504 Electrical trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle price is a mixed supply. Each of these Hems can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; Further, tax liability on a mixed supply shall be determined as defined in Section 8 (b) of GST Act, 2017 which is as under- a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of lax. Therefore, the Solar Water Pumping System (comprising of Solar panel + Controller + Solar Pump + Structure) is a Mixed Supply and highest rate of GST will be applicable amongst goods supplied by the applicant.- Solar panel + Solar Controller + Solar Pump Solar Pump + Solar Panel Solar Pump + Controller Solar Panel + Controller Since the above composition is the mixed supply of goods, as already discussed in above para, hence the highest rate of GST will be applicable amongst goods supplied by the applicant. 4. Now we will discuss the second question as under: - Q. What should be the classification and GST rate on Supply of Solar water pumping system as a whole comprising of goods (Solar Panel + S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a composite supply in which construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc. are involved along with transfer or property in goods. b. Under GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting out. improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property, only then it will be classified as works contract. 2. Further, we observe that the supply, supplied by the applicant i.e comprising of goods (Solar Panel + Solar Controller + Solar Pump + Structure) along with the installation is a composite supply of works contract, and the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017. as amended from time to lime. The relevant portion of the S. No. 3 (Heading 9954) (ii) of the Notification No 11/2017-CT (Rate) dated 28.06.2017 (as amended) is as under: - S.No. Chapter, Section or Heading Description of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
