Setting Up & Operation of Solar Power Plant is in nature of ‘Works contract’, 18% GST applicable: AAR [Read Order]

The Authority for Advance Ruling ( AAR ) Maharashtra ruled that in the case of separate contracts for supply of goods and services for solar power plant, there would be a cumulative consideration as ‘works contract’ and hence the rate of tax would be 18% under IGST and an aggregate of 18% of CGST and SGST.

The applicant M/s Fermi Solar Farms Ltd. is engaged in the operation of renewable energy power plant projects. These typically include operation of soar power plants set up across India for generation and distribution of electricity generated through solar plants.

The Applicant approached the authority.

The Applicant approached the authority seeking clarification on the following questions:

• Whether in case of separate contracts for supply of goods and services for a solar power plant, there would be separate taxability of goods as ‘solar power generating system’ at 5% and the services at 18% ?
• Whether parts supplied on standalone basis (when supplied without PV modules) would also be eligible to concessional rate of 5% as parts of solar power generating system ?
• Whether benefit of concessional rate of 5% of solar power generation system and parts thereof would also be available to sub-contractors ?

Though the authority couldn’t provide clarity to the other two questions owing to absence of any documents, the first question was clarified in the aforementioned manner. The authority further stressed that depending upon the nature of supply, intra-state or inter-state, the rate of tax would be governed by the governed by the entry under Integrated Goods and Service Act, 2017.

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