Solar power is the conversion of energy from sunlight into electricity, either directly using Photovoltaics (PV), indirectly using concentrated solar power, or a combination. Concentrated solar power systems use lenses or mirrors and solar tracking systems to focus a large area of sunlight into a small beam. Photovoltaic cells convert light into an electric current using the photovoltaic effect. Photovoltaics were initially solely used as a source of electricity for small and medium-sized applications, from the calculator powered by a single solar cell to remote homes powered by an off-grid rooftop PV system.
The Solar Power Generating Systems is consists of the following components such as Solar Panels, Batteries, Controller, Inverter etc. The item “Solar Power Generating Systems and parts for their manufacture” are taxable @ 5% under GST Act, 2017 vide Notification No. 01/2017-CT (Rate) dated 28.06.2017 Serial No 234. The entry is reproduced herein below for your kind perusal:
84 or 85 or 94
Following renewable energy devices and parts for their manufacture
a) Bio-gas Plant
b) Solar Power based devices
c) Solar Power generating System
d) Wind Mill and Wind Operated electricity generator
e) Waste to energy plants / devices
f) Solar lanterns / solar lamps
g) Ocean waves / tidal waves energy devices / plants
h) Photo voltaic cells, whether or not assembled in modules or made up into panels
The Solar Power Generating System is not defined in the Act and there is no restriction provided on what would qualify as parts and in such cases all goods quality as part of Solar Power Generating System can claim concessional rate of tax.
For the Supply of a Solar Power Generation System, a Company will need Goods [like solar modules, invertors, power transformers etc.] and Services [like construction, erecting, commission]. Company assembles all these goods and provides the above necessary services. Thus, a Solar Power Generation System will be established. The rate of tax for Renewable Energy Devices and parts of Solar Power Plant is notified I Notification no. 1/2017-Central Tax (rate) New Delhi [28th June, 2017] in Schedule I (Serial Number 234). It was said that, GST rates for Renewable Energy Devices and parts of Solar Power Plant falling under Chapter 84, 85, 94 of Tariff would continue to be 5%.
Afterwards, an explanation was added against Serial No: 234 by Notification No. 24/2018- Central Tax (rate), New Delhi[31st December, 2018], that if goods specified in this entry are supplied by a supplier along with supplies of other goods and services one of which being taxable service which is specified in the entry at Serial No. 38, mentioned in notification no. 11/2017, the value of supply of goods for the purpose of this entry shall be deemed as 70% of gross consideration charged for all such supplies and the remaining 30% of the gross consideration shall be deemed as the value of said taxable service.
Notification no 11/2017 Serial No.38 is Roofing and waterproofing services
On the Combined reading of Serial No 38 along with Explanation to Serial No 234 which means, if the Solar Power Generating System is Supplied for roofing and water proofing 70% of the invoice value should be taxed on 5% GST rate and for balance 30%, 18% GST rate will be applied. 70% is for the goods portion (being material cost) and the 30% is for the service portion (installation, erection etc.).
Composite and Mixed Supply
Composite supply means a supply made by a taxable person to a recipient and:
- Comprises of two or more taxable supplies of goods or services or both, or any combination thereof.
- These are naturally bundled and supplied in conjunction with each other, in ordinary course of business.
- One of which is a Principal Supply
- Tax liability shall be of the rate of the Principal Supply.
Mixed Supply means,
- Two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person
- For a single price where such supply does not constitute a composite supply.
- The individual supplies are independent of each other and are not naturally bundled
- Tax liability shall be the rate applicable to the supply that attracts highest tax rate.
Composite or Mixed supply
In a supply, If the service portion (erection, commissioning, installation) is less than 10% of whole cost of the Plant and if the components forms a Principal supply, then that supply will be treated as a Composite Supply.
E.g.: Supply of Solar Power Plant with Batteries is a Composite Supply.
GST Rates for Individual Supply of Solar Items:
Solar Power Pack
Solar Water Heater
Solar Street Light
Solar I&C (Installation and Commission)