Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 21-12-2018 – The orders of Appellate Advance Ruling Authority (AAAR) have started pouring in. In this article, to recent Appellate advance rulings on solar power plants and works contracts in relation thereto are discussed. Appellate advance ruling on works contract and rate of GST (AAR ruling affirmed ) M/s. Fermi Solar Farms Private Ltd. (Appellant) is engaged in operation of renewable energy power plant projects. These typically include operation of solar power plants set up across India for generation and distribution of electricity generated. The appellant is emerging as a leading builder of renewable energy projects. The Appellant filed an Application for Advance Ruling for seeking clarification basis the draft contracts of the Appellant, in view of the provisions of 'composite supply' and the rate of tax provided for Solar Power Generating System under GST. The Appellant sought clarification in respect of
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orks contract' in terms of clause (119) of Section 2 of the GST Act, and hence, should be taxable at the rate of 18% In the absence of any documents, the AAR was not able to deal with the question regarding applicability of concessional rate of tax on parts of solar power generating system in the present proceedings. With regard to the question whether benefit of concessional rate of 5% of SPGS and parts thereof would be available to sub-contractors, it was held that no documents were provided and hence this question was not dealt with in the proceedings. Being aggrieved by the advance ruling, the Appellant preferred the appeal before AAAR belatedly as the AAAR was not constituted. The AAAR condoned the delay. It was ruled that the agreements tendered in support of this question are for setting up and operation of a solar photovoltaic plant and are in the nature of a 'works contract' in terms of clause (119) of section (2) of the GST Act. Schedule II ( Activities to be trea
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photovoltaic plants for supply of power generated. In various cases, the Appellant also is a Project developer wherein it is engaged in operation of renewable energy power plant projects. Typically, a contract is entered into by the Appellant to do end to end setting up of a solar power plant which includes supply of various goods (such as modules, structures, inverter transformer etc.) as well as complete design, engineering and transportation, unloading, storage and site handling, installation and commissioning of all equipments and material, complete project management, civil works/construction related services for setting up of a functional solar power plant. In the instant case, the contract entered into by the Appellant included end to end activities i.e. supply of various goods and services and hence is for the supply of solar power generating system. The intent of the contract is that the entire contract would be undertaken by the Appellant for supply and setting up of the sola
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t the goods and services may be required to fulfill the intention of the buyer in giving the contract. The supply of goods and services are provide as a package and the different elements are integral to flow of supply i.e. one or more is removed, the nature of the supply would be affected. Thus, from a reading of the entire contract as well as from the definition of composite supply what can be easily gathered is that the buyer has given a contract for setting up Solar Power Generating Supply to the appellant and therefore, it is single composite supply of goods and services and installation thereof. The contract for providing the design, procurement, supply, development, testing and commissioning of the plant which includes the supply of both goods and services is a composite supply as per the definition in the Act. There are two taxable supplies- one of goods and the other of services and they both are naturally bundled and it is natural and also a practice to expect that the contra
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