2019 (2) TMI 917 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – TMI – Classification of goods/services – activity of supply, design, installation, commissioning and testing of solar energy based water pumping systems supply of goods or supply of services – Works contract – composite contract – rate of GST – CBEC Circular 58/1/2002-CX dated 15/1/2002.
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Held that:- The supply of solar energy based water pumping systems along with its installation, commissioning and operation and maintenance is a single supply – the activity of supply, design, installation, commissioning and testing of solar energy based water pumping systems along with construction and O & M work by the applicant is a Works Contract of Composite Supply. This composite supply is a mixed of goods and services and predominant supply is supply of services. Since this supply is undertaken for a Government Department viz. PHED which is a Government of Rajasthan Department, hence the rate of tax applicable on given service (
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n (GSTIN is 08ALVPC2862Q1ZA, 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. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT: 1.1. The applicant is engaged in providing the comprehensive water services to the clients by way of water conservation, water distribution, water purification, water supply management, etc. That currently the applicant is in the process of bidding for tender floated by P.H.E.D., a unit of Rajasthan Government for designing, providing, installation, commissioning, operation and maintenance of solar energy based bore well water pumping systems, Reverse Osmosis Plant and operation and maintenance of Fluoride Control Project on ESCO and O & M contract. 1.2. That in relation to such tender the applicant is required to quote a rate for undertaking all the af
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de-fluoridation unit and all other components and accessories as per specification, drawing and design and making it operational and keeping operational up to complete O&M period of 7 years. iii. The above mentioned work shall comprise the following major activities: a) Carrying out work at locations finalized at the time of award of work. b) Designing of Solar Water Pumping Systems for the habitation(s) as per award of work. Providing, installation, Commissioning & Testing of Solar Water Pumping System as per design within stipulated time as mentioned in letter of award of contract. c) The PV modules shall be mounted on metallic structures of adequate strength and appropriate design, which can withstand load of modules, live loads if any and high wind velocities up to 200 km per hour. d) Support structure should be designed keeping in view local site conditions and generalized soil formation. All codes and provisions for RCC design should be followed. The minimum depth of foun
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all be under comprehensive warranty of contractor for a period of seven years from the date of commissioning against any defects. j) The operation and maintenance of complete system shall be responsibility of the contractor during this entire period of 7 years wherein the applicant shall keep the plants operational regularly with specified flow/ quantity of water. k) That on the expiry of the O&M period, the applicant may remove the plant at its own cost and vacate the land subject to prior intimation to PHED and shall take the possession of the plant. 1.3. Since composite supply of works contract has been explicitly classified as supply of service under Schedule Il, tax liability on works contract service has been expressly prescribed. Therefore, the concept of works contract should to be discussed and settled first. However 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
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testing of solar energy based water pumping systems to provide potable water to the villagers and operation and maintenance of the system for a period of 7 years. 1.6. That the applicant will not be only responsible for providing, installation, erection and commissioning of the system but also for the smooth functioning of the system for a period of 7 years and any defect in the system during such period shall be rectified by the applicant. Therefore, the business operandi of the said transaction is such that the applicant is required to undertake the operation and maintenance of the installed system for a period of 7 years. 1.7. Thus, on the basis of above submissions, it is amply clear that these supplies are naturally bundled in the ordinary course of business and therefore same shall fall under the ambit of composite supply thereby liable to tax at the rate applicable on the principal supply. 1.8. Further to determine the principal supply in the given case, it has been explained t
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hus, applicant understands that the given work should be treated as a supply of goods and cannot be treated as supply of service. 1.11. Since solar power based water pumping system is a system, consisting of various individual components such PV modules, pumps interconnected by various cables and other transmission devices, intended to contribute for filtering or purification of water, thus, it should be classified under the heading 8421 and further under tariff item 8421 21 90 in the First Schedule to the Customs Tariff Act, 1975. 1.12. However, under Notification No. 01/2017-Central Tax (Rate), solar power based devices have been specifically listed in Entry 234 of Schedule I having prescribed CGST rate of 2.5%. Hence, according to applicant it would be most appropriate to classify solar energy based water pumping system under Entry 234 of Notification No. 1/2017-CT (Rate) as solar power based device. Thus the rate of tax shall be 5% on supply of given Solar Power Based Devices. 1.13
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the applicant is of the understanding that in case of above transaction, the entire work to be awarded shall be composite supply wherein the principal supply shall be supply of goods i.e. solar power water pumping station and the same should be taxable at the rate of 5%. If in case, it is considered as composite supply of works contract, then it should be classified under S. No. 3(iii) of the Notification No. 11/2017-CT (Rate) and should be taxable at the rate of 12%. 2. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT Whether the activity of supply, design, installation, commissioning and testing of solar energy based water pumping systems supply of goods or supply of services and what shall be the rate of GST on it? 3. PERSONAL HEARING In the matter personal hearing was given to the applicant on 11.01.2019 at Room no. 2.22 NCRB, Statue Circle, Jaipur. Mr. Mudit Jain (Authorised Representative) of applicant appeared for PH. During the PH, he reiterated the submissions made in the appl
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are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; c. Further principal supply is defined under Section 2(90) as (90) principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; d. Further, clause 6 of the Schedule Il is read as under The following composite supplies shall be treated as a supply of services, namely:- i. works contract as defined in clause (119) of section 2 e. The term works contract has been defined under Section 2(119) as (119) works contract means 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 inv
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ion, alteration or commissioning is for immovable property only, then it will classify as works contract. Hence it means that aforesaid activities if they are undertaken for a movable property then it will not be works contract service. 3. Now whether a supply is a works contract or not is dependent on whether the plant or device or property is a movable or immovable property. To decide whether a property is movable or immovable, the given terms have not been defined under the Act and hence the reliance needs to be placed on other laws and judicial precedents. Under the General Clauses Act 1897 the term immovable property has been defined under Section 3(26) as immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth; 4. On the given issue, CBEC has also clarified in its circular number 58/1/2002-CX dated 15/1/2002 where in para (e) it was clarified that e) If items assembled or ere
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and maintenance is a single supply owing to the following factors:- A single tender shall be floated for the supply, installation and operation and maintenance of the plant. Special conditions of the contract generally specify that the contractor shall be bound to carry out the O & M maintenance of the installed plants for seven years. Designing, providing, installation, Commissioning & Testing of Solar based Water Pumping System and all the necessary works to make the system operational. A comprehensive operation and maintenance of the installations for a period of 7 years. Providing potable water to villagers regularly free of cost at site of SPV plant during and up to end of O & M period. 1. According to definition of works contract under GST regime, the supply of goods and services are done by the supplier simultaneously which is for immovable property. Hence in works contract supply of goods and services together is compulsory. Thus, based on above facts and concept s
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ir, maintenance, renovation, or alteration of, (a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958); (b) canal, darn or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. 6 6 12 Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be; K. It is therefore, the activity of supply, design, installation, commissioning and testing of solar ener47 based water pumping systems along with construction and O & M work by the applicant is a Works Contract of Composite Supply. This composite supply is a mixed of goods and services and predominant
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