Date of Blog : 16-Jan-2015
Andhra Pradesh High Court has held that the supply of solar power generating system (SPGS) does not qualify as works contract rather it is a composite supply for levying GST.
The bench of Justice R Raghunandan Rao and Justice Maheswara Rao Kuncheam has observed that the property in question, viz., the Solar Power Generating System would not answer the description of immovable property. The transaction in question would not fall within the meaning of “works contract” as defined under Section 2(119) of the GST Act.
The bench relied on the decision of the Supreme Court in the case of Excise, Ahmedabad v. Solid and Correct Engineering Works things attached to the earth would be immovable property. However, Section 3 of the Transfer of Property Act clarifies that this term would apply to trees and shrubs; buildings or goods embedded in the earth; and things, which are attached to what is embedded in the earth, for the permanent beneficial enjoyment of the structure embedded in the earth.
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 immovable 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 bench held that 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.
“Applying the aforesaid test, it must be held that the property in question, viz., the Solar Power Generating System would not answer the description of immoveable property. The transaction in question would not fall within the meaning of works contract, as defined under Section 2(119) of the GST Act,” the Court observed and set aside the order passed by the tax authority.
References :
Andhra Pradesh High Court Rules Solar Projects Liable for 5% GST
Solar Power Generating system not an immovable property, says AP HC - The Hindu BusinessLine
Activity of supply of solar generating power station amounts to composite supply: Andhra Pradesh HC