2018 (9) TMI 1333 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (17) G. S. T. L. 532 (A. A. R. – GST) – Rate of tax on supply of goods/services/both – Solar Power Generating Systems and parts – Works Contract – Whether Supply, commissioning, installation and maintenance of Solar Water Pumping System would be taxable at the rate of 5% considering it as a composite supply where the principle supply being that of goods i.e. supply of Solar Power generating system having HSN Code 84 or 85? – Whether separate bills can be raised by the Applicant with respect to Supply and Goods and Supply of Services Purely in respect of the contract of the Applicant with RHDS enclosed herewith? – Will the said transaction be classified as a “Works Contract” and taxable at the rate of 18% being Supply of Services?
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Held that:- Solar Photovoltaic (SPV) water pumping system has a permanent location (at specified farmer’s field in Rajasthan) as its works is undertaken on instructions of the Rajasthan
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as set out in Scope of work and in the Technical Specifications. Civil structure cannot be dismantled and moved away.
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The applicant has to supply a “Functional Solar Photovoltaic (SPV) water pumping system” as a whole which includes supply, installation and commissioning, maintenance for 10 years, hence instant transaction is neither a supply of i) “Solar Power Generating System” and nor a supply of ii) “Solar Power Based Devices” – the above entry under the notification describes the Tax rate on ‘Goods’. If the transaction is supply of goods i.e. supply of either “Solar Power Generating System” or supply of “Solar Power Based Devices” then the applicable Schedules would have to be seen but the intent of parties in instant case is always for supply of a “Functional Solar Photovoltaic (SPV) water pumping system” as a whole which includes supply, installation and commissioning at the site of farmer along with maintenance for 10 years and is not chattel sold as chattel. Hence canno
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cordingly it is not getting covered under supply of ‘Solar Power Generating System’ under Entry 234 of Schedule I of the Notification no. 1/2017 – Central Tax (Rate), dated 28th of June, 2017 under HSN code 84 or 85. “Supply, installation, commissioning and maintenance of Solar Water Pumping Systems” falls under the purview of Works Contract as per Section 2(119) of GST Act.
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In instant case as per terms and conditions of agreement, it is a single contract of supply, installation, commissioning and maintenance of Solar Water Pumping Systems and hence cannot be split in two separate contracts. Hence in instant case separate bills for supply of goods and supply of services cannot be raised.
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The contract for “supply, installation, commissioning and maintenance of Solar Water Pumping Systems” falls under the ambit of “Works Contract Services” which comes under the purview of Works Contract as per Section 2(119) of CGST Act and attracts 18% rate of tax under IGST Act, or 9%
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nce ruling. 1. Submission of the Applicant: Statement of relevant facts having a bearing on the question(s) raised. 1. M/s. Tag Solar System, a partnership firm which is engaged in Supply, Commissioning, Installation, Maintenance of Solar Water Pumping System within a stipulated time period. 2. Such Supplies are given on the instructions of the Rajasthan Horticulture Development Society under subsidy scheme wherein the Solar Water Systems are required to be installed at the farmer s field. The scope of work is reproduced hereunder: supply, installation, commissioning and maintenance of Solar Water Pumping Systems 3. Accordingly the Applicant Supplies, Installs, Commissions and Maintains the said systems and perform end to end activities in this regard. 4. There may be a consolidated price for all the activities undertaken by the Applicant which involves both the Supply of Goods and Supply of Services. 5. Applicant has no clarity with respect to the rate of tax on such Supply. As per th
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or not assembled in modules or made up into panels As per the above Entry in the Rate Schedule, the supply of item under consideration i.e. Solar Water Pumping System falls squarely under the definition of Solar power generating System and such supply should be taxable at the rate of 5% as they are systems which absorb sunlight and convert it into electricity which can be put to further use. The above mentioned Entry Solar Power Based Devices under Chapter heading 84 or 85 or 95, the item in question i.e. Solar Water Pumping System can also be covered under this category as it is a device run by solar power. Solar Water Pumping System is an apparatus used for pumping water which runs on solar energy. The dictionary meaning of device is reproduced as under: a thing made or adapted for a particular purpose, especially a piece of mechanical or electronic equipment Solar Water Pumping System is an equipment which harnesses solar energy in order to pump water. Therefore, it can also be alt
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s factory site was immovable property as something attached to earth like a building or a tree. The Tribunal has pointed out that it was for the operational efficiency of the machine that it was attached to earth. If the appellant wanted to sell the paper making machine it could always remove it from its base and sell it. Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a house-holder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of t
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achment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures. 24. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give s
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cts and judgments Solar Water Pumping Systems cannot be categorized as Immovable Property and the activity in relation to movable property cannot in any way be categorized as a Works Contract as the definition of Works Contract under CGST Act, 2018 does not cover activities in relation to movable property. Hence, the whole transaction cannot be termed as a Works Contract. Applicant has stated that the instant case is of Composite Supply where in the present scenario, it is very important to see what the Principal Supply is as the rate of tax of such transactions depends on the rate of tax of the Principal Supply. Applicant has interpreted that predominant element of the Supply being made in the instant case relates to Supply of Solar Water Pumping Systems. There is one single Supply Tender which involves the Supply of the Systems to the recipient and the work of installation, maintenance, commissioning is ancillary to the activity of Supply of the Solar Water Pumping Sets. Since, the s
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the rate of 18% being Supply of Services? 4.1 Personal Hearing (PH): In the matter personal hearing was given to the applicant Shri Pankaj Ghiya (Authorised Representative) who appeared for personal hearing on 08.07.2018. During the PH he submitted EOI Document of Empanelment Report, copy of a circular of CBEC dated 15.01.2002 and Supreme court judgment of M/s. Sirpur Paper Mills containing the applicant s interpretation of law and facts in respect of the aforesaid questions which was placed on record. They reiterated the submission already made in the application for Advance Ruling and further requested that the case may be decided as per the submission made earlier in Advance Ruling Application. Applicant was instructed to submit copy of Work Order and some sample bill which was done by them on a later date. 4.2 The jurisdictional officer in her comments has stated that the contract given to the applicant is of supply, installation, commissioning and maintenance of Solar Water pumpi
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ntion in the instant case is not to procure goods of Solar Photovoltaic (SPV) water pumping system but to procure a completely functional Solar Photovoltaic (SPV) water pumping system as a whole wherein applicant undertakes end to end responsibility of supply of equipments including installation and commissioning to a defined technical specifications and testing, commissioning of a fully functional Solar Photovoltaic (SPV) water pumping system. d) Under General Condition of Contract (IV) in clause IV.2 of EOI all risk and liabilities (insurance charges) accruing in relation of works (temporary or permanent), and of all equipments, machinery, materials, shall be with applicant until occurrence of the Final Acceptance. e) Schedule IV -(Scope of works) of EOI clearly spells out the terms and conditions where contractor has to undertake works of supply installation and commissioning of Solar Photovoltaic (SPV) water pumping system as per specific demands of the owner. So it is not the some
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pumping system as a whole which includes supply, installation and commissioning and it is not chattel sold as chattel. i) Applicant has submitted that under GST, there is a monumental shift in concept of Works Contract which was prevalent under erstwhile VAT and Service Tax regime. In 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, then only it would classify as works contract service . Hence it means that if aforesaid activities are undertaken for a movable property then it will not be works contract service. j) Applicant has relied upon following judgment and Circular in furtherance of their arguments of Solar Photovoltaic (SPV) water pumping system being movable property and not immovable: i) Sirpur Paper Mills Ltd. v. Collector – 1998 (97) E.L.T. 3 (S.C.) = 1997 (12) TMI 109 – SUPREME COUR
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oning of the system and further has a obligation of maintenance for a certain period. The transaction is a work contract but it is for us to decide whether it is a work contract in terms of GST Act. So, we come to the crux of the issue and which is as to whether the transaction results into any immovable property. The term immovable property has not been defined under the GST Act. However, there are a plethora of judgments of the Hon. Supreme Court and the Hon. High Courts which have helped understand the term immovable property . 1. In decision of Allahabad High Court in Official Liquidator v. Sri Krishna Deo and Ors. [AIR 1959 All. 247] = 1958 (5) TMI 35 – HIGH COURT OF ALLAHABAD, wherein, the Court held that a machinery fixed to their bases with bolts and nuts although easily removable are not movable property when they have been set up with definite object of running an oil mill and not with intention of being removed after a temporary use. 2. In decision of M/s. T.T.G. Industries
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ommissioned on site. In their reply to the show cause, the respondents explained the processes involved, the manner in which the equipments were assembled and erected as also their specifications in terms of volume and weight. It was explained that the function of the drilling machine is to drill hole in the blast furnace to enable the molten steel to flow out of the blast furnace for collection in ladles for further processing. After the molten material is taken out of the blast furnace, the hole in the wall of the furnace has to be closed by spraying special clay. This function is performed by the mudgun which is brought to its position and locked against the wall for exerting a force of 240-300 tons to fill up the hole in the furnace. The blast furnace in which the inputs are loaded is a massive vessel of 1719 m cubic metre capacity and the size of its outer diameter is 10.6 metres, and the height 31.25 metres. Hot air at 1200 degrees centigrade is fed into the blast furnace at vari
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t 25 feet above ground level. After welding the columns, the base plate has to be secured to the concrete platform. This is achieved by getting up a trolley way with high beams in an inclined posture so that base plate could be moved to the concrete platform and secured. The same trolley helps in the movement of various components to their determined position. The various components of the mudgun and drilling machine are mounted piece by piece on a metal frame, which is welded to the base plate. The components are stored in a store-house away from the blast furnace and are brought to site and physically lifted by a crane and landed on the cast house floor 25 feet high near the concrete platform where drilling machine and mudgun has to be erected. The weight of the mudgun is approximately 19 tons and the weight of the drilling machine approximately 11 tons. The volume of the mudgun is 1.5 x 4.5 x 1 metre and that of the drilling machine 1 x 6.5 x 1 metre. Having regard to the volume and
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e, and also considering the fact that there is no space available for moving the machines in assembled condition due to their volume and weight. She considered the authorities on the subject and came to the conclusion that erection of mudgun and tap hole drilling machine results in erection of immovable property. She noticed the judgment of this Court in Narne Tulaman Manufacturers Pvt. Ltd. (supra) and also noticed the judgment of the Tribunal in Gwalior Rayon Silk Manufacturing (Weaving) Co. Ltd. v. CCE – 1993 (65) E.L.T. 121 = 1992 (10) TMI 188 – CEGAT, NEW DELHI; which held that the issue of immovable property was never raised before the Supreme Court in Narne Tulaman Manufacturers Pvt. Ltd = 1988 (9) TMI 51 – SUPREME COURT OF INDIA. She found support for her conclusion in the decision of this Court in Municipal Corporation of Greater Bombay & Ors. v. The Indian Oil Corporation Ltd. (1991) Supp. (2) SCC 18 = 1990 (11) TMI 407 – SUPREME COURT; and held that the twin tests laid d
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he definition of goods and, therefore, excise duty is not leviable thereon". The core question that still survives for consideration is whether the processes undertaken by the appellant at Bhilai for the erection of mudguns and drilling machines resulted in the emergence of goods leviable to excise duty or whether it resulted in erection of immovable property and not "goods" The appellant has placed considerable reliance on the principles enunciated and the test laid down by this Court in Municipal Corporation of Greater Bombay (supra) to determine what is immovable property. In that case the facts were that the respondent had taken on lease land over which it had put up, apart from other structures and buildings, six oil tanks for storage of petrol and petroleum products. Each tank rested on a foundation of sand having a height of 2 feet 6 inches with four inches thick asphalt layers to retain the sand. The steel plates were spread on the asphalt layer and the tank was
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sition or liable to be dismantled and re-erected at the later place? If the answer is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth. If the answer is yes to the latter it is attached to the earth." Applying the permanency test laid down in the aforesaid decision, counsel for the appellant contended that having regard to the facts of this case which are not in dispute, it must be held that what emerged as a result of the processes undertaken by the appellant was an immovable property. It cannot be moved from the place where it is erected as it is, and if it becomes necessary to move it, it has first to be dismantled and then re-erected at another place. This factual position was also accepted by the Adjudicating Authority. The technical member, however, held that the aforesaid decision was of no help to the appellant inasmuch as a leading international
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or of Central Excise, UP – 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 – SUPREME COURT OF INDIA; the facts were that a tube mill and welding head were erected and installed by the appellant, a manufacturer of steel pipes and tubes by purchasing certain items of plant and machinery in market and embedding them to earth and installing them to form a part of the tube mill and purchasing certain components from the market and assembling and installing them on the site to form part of the tube mill which was also covered in the process of welding facility. After noticing several decisions of this Court, the Court observed that the twin tests of exgibility of an article to duty under the Excise Act are that it must be a goods mentioned either in the Schedule or under Item 68 and must be marketable. The word "goods" applied to those which can be brought to market for being bought and sold and therefore, it implied that it applied to such goods as are movable. It noticed the decisi
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d in sugar factories to exhaust molasses of sugar. The material on record described the functions and manufacturing process. A mono vertical crystaliser is fixed on a solid RCC slab having a load bearing capacity of about 30 tons per square meter. It is assembled at site in different sections and consists of bottom plates, tanks, coils, drive frames, supports, plates etc. The aforesaid parts were cleared from the premises of the appellants and the mono vertical crystalliser was assembled and erected at site. The process involved welding and gas cutting. The mono vertical crystalliser is a tall structure, rather like a tower with a platform at its summit. This Court noticed that marketability was a decisive test for dutiability. It meant that the goods were saleable or suitable for sale, that is to say, they should be capable of being sold to consumers in the market, as it is, without anything more. The Court then referred to the decision in Quality Steel Tubes (supra) and distinguished
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at installation or erection of turbo alternator on the platform constructed on the land would be immovable property, as such it cannot be an excisable goods falling within the meaning of Heading 85.02. In reaching this conclusion this Court considered the earlier judgments of this Court in Municipal Corporation of Greater Bombay, Quality Steel Tubes and Mittal Engineering Works Pvt. Ltd. (supra) as also the earlier judgment of this Court in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad – 1998 (97) E.L.T. 3 (S.C.) = 1997 (12) TMI 109 – SUPREME COURT OF INDIA. This Court observed :- "There can be no doubt that if an article is an immovable property, it cannot be termed as "excisable goods" for purposes of the Act. From a combined reading of the definition of 'immovable property' in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketa
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hat the mudguns and the drilling machines erected at site by the appellant on a specially made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform, brought into existence not excisable goods but immovable property which could not be shifted without first dismantling it and then re-erecting it at another site. We have earlier noticed the processes involved and the manner in which the equipments were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regard to the nature of structure erected for basing these machines, we are satisfied that the judicial member of the CEGAT was right in reaching the conclusion that what ultimately emerged as a result of processes undertaken and erections done cannot be described as "goods" within the meaning of the Excise Act and exigible to excise duty. We find considerable similarity of facts
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answer the description of "goods" within the meaning of the term in the Excise Act. Thus, it can be seen that 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. 6. In light of above judgments and scope of work it is observed: 1) That Solar Photovoltaic (SPV) water pumping system has a permanent location (at specified farmer s field in Rajasthan) as its works is undertaken on instructions of the Rajasthan Horticulture Development Society under subsidy scheme wherein the Solar Water Systems are required to be installed at the farmer s field meant for supply of water using solar energy. Such plant would therefore have
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ity and its maintenance and after sales services for 10 years (It includes 5 years guarantee period). The applicant has himself agreed to be bound by this clause which reflects permanency of the installed Solar Photovoltaic (SPV) water pumping system. Contract between applicant and the counter-party is entered into on the premise that the system would continue to be situated at the place of construction; 6. Case laws citied by applicant has to be understood in terms of the facts as available therein. As in the case of M/S Solid and correct Engineering Works (citied Supra) the plant was not intended to be permanent and was to be shifted after completion of road repair and Construction work hence was regarded as moveable. But in instant case the solar power water pumping system has an element of permanency. 7. The applicant has laid claim under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94 and has regarded the instant transaction
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intenance for 10 years and is not chattel sold as chattel. Hence cannot be treated as Composite Supply as contended by the applicant. 10. An overview of all makes us observe that the impugned transaction for supply of Solar Photovoltaic (SPV) water pumping system which includes procurement, supply, development, testing, commissioning and providing maintenance service for 10 years is a works contract in terms of clause (119) of section 2 of the GST Act. 11. Since the impugned transaction for supply and commissioning of Solar Photovoltaic (SPV) water pumping system is a works contract u/s 2(119) as supply of services, hence question of principal supply does not arise and so GST tax rate of Solar power Generating System or Solar Power Based Devices 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. Based on above facts along with provision of law the ruling is as follows: RULING 1 As per the statement of facts
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