According to the Authority for Advance Ruling (AAR) for GST in Maharashtra it is stated that the engineering, procurement and construction (EPC) activities are understood as ‘work contract‘ and therefore liable to be taxed at 18 percent GST, and according to the ruling, it may hike the cost of setting up of solar plants.
While a petitioner has argued that all these must be considered as ‘composite supply‘ and would be applicable with a concessional rate of 5 percent for all the solar power generation stations.
A prominent tax partner in firm stated that “If the levy of 18%, vis-a-vis a general industry belief of 5% is upheld at higher judicial forums as well, it may increase the cost of solar power plants since electricity is not liable to GST and input GST becomes a cost.”
A Mumbai based solar contractor argued that the GST defines ‘works contract’ involving immovable property while the commissioning of the solar power plant is a movable plant hence should be considered under the ‘works contract’
However, the authority cleared its point by stating that the commissioning of such plant is a permanent work and will be catering to the known consumers, while a contract has been formulated between the EPC contractor and the counterparty that the plant will continue to be situated at the place of operation and construction.
Earlier the issues were in the news but the supreme court cleared the fact and stated that it would apply with 18 percent GST. A person known stated that “EPC players are planning to present the issue to the GST council soon.”
