Supply Of Solar Generating Power Station Is A Composite Supply, Would Not Amount To Works Contract; Attracts 5% GST: Andhra Pradesh High Court

The Andhra Pradesh High Court stated that the supply of solar generating power station is a composite supply and it would not amount to a works contract. Also, it is a moveable property and attracted 5% GST. The Division Bench of Justices R Raghunandan Rao and Maheswara Rao Kuncheam observed that “a 'works contract' is also a composite supply. However, there could be a 'composite supply', which does not fall within the ambit of 'works contract'….. The distinction between 'works contract' and a 'composite supply' would be whether the end product handed over to the contractee, is moveable or immoveable property.” In this case, the assessee/petitioner, is engaged in the business of setting up of Solar Power Plants and had been paying GST @ 5% of its turnover. As the rate of GST on the inputs, obtained by the assessee, was higher than the GST rate of finished goods, the assessee, invoking the provisions of Section 54 of the A.P. Goods and Services Tax Act, 2017, claimed refund for the period January, 2018 to March, 2018, This application was rejected and became the starting point of a fresh enquiry, for assessment of tax. The Assessing Authority issued a show cause notice, proposing to assess the turnover of the assessee @ 18%, on the ground that the transactions undertaken by the assessee are Works Contract, as defined under Section 2(119) of the GST Act. The assessee objected to the same, on the ground that the activities of the assessee would have to be treated as composite supply, as defined under Section 2(30) of the GST Act, attracting GST @ 5% on the turnover. This contention was rejected and the Assessing Authority assessed the turnover of the petitioner @18%. Aggrieved by the order, the assessee moved an appeal before the Joint Commissioner. The Joint Commissioner rejected the appeal to the extent of the assessment of tax and interest payable on the said tax. The bench observed that “the solar power plant is not trees or shrubs, which are rooted in earth or a structure embedded in the earth. The appellate authority also accepts that the solar power module is attached to the civil foundation, which is embedded in the earth. The property, which is attached to a structure embedded in the earth, would also become immoveable property only when such attachment is for the permanent beneficial enjoyment of the structure, which is embedded in the earth. In this case, the civil foundation is embedded in the earth.” The solar modules and the Solar Power Generating System have not been attached to the civil structure for the purpose of better enjoyment or beneficial enjoyment of the civil foundation. On the contrary, the civil foundation has been embedded on earth for better permanent and beneficial enjoyment of the Solar Power Generating Station, added the bench. The bench referred to the case of Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works, [2010 AIR SCW 2514] and held that the property in question is not embedded in the earth to bring it within the meaning of immoveable property. Once it is held not to be embedded, the question of whether it is a permanent embedment or not, would not arise. The bench further held that the supply of the Solar generating Power Station, is a composite supply, it would not amount to a works contract. In view of the above, the bench allowed the petition. Case Title: Sterling And Wilson Private Limited v. The Joint Commissioner and Others Case Number: WRIT PETITION NO: 20096/2020 Counsel for Petitioner/ Assessee: Murali Babu Doma Click Here To Read/Download The Order

Supply Of Solar Generating Power Station Is A Composite Supply, Would Not Amount To Works Contract; Attracts 5% GST: Andhra Pradesh High Court

Mehak Dhiman

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