Uttar Pradesh GST AAR: 12% Tax Rate Applies on Solar Home Lighting Systems

The Authority of Advance Ruling (AAR), the Uttar Pradesh bench has ruled that solar home lighting systems are subject to 12% GST.

The Rajendra Kumar and Harilal Prajapati bench has noted that ‘solar home lighting systems are included under the category of solar-based devices covered under HSN Code 94055040.

The applicant proposed to supply a solar home lighting system made up of Solar photovoltaic Modules, a lithium ferro phosphate battery, a solar charge controller, LED Lights, a solar DC Fan, a module organized structure, a subscriber-end visual display or tablet, an AC-DC adapter, and Conduit items like cable, PVC Pipes, and PVC Fittings.

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A solar home lighting system is a solar energy-powered fixed setup built for domestic uses. Solar cells are used to transform solar energy straight from sunlight into electricity. The transformed electricity is stored in batteries and then used to light the home whenever required.

The applicant expected an early decision on the matter of whether the supply of goods in question will be included under solar-based devices.

The AAR observed that some modifications in the GST rate for a host of products were specified by the Central Board of Indirect Taxes and Customs (CBIC) which came into effect on October 1, 2021. In this change, a GST of 12% was charged against 5% earlier on solar panels and modules, solar power-based devices, solar power generators, windmills, solar lamps, tidal wave energy devices or plants, and their parts.

The AAR acknowledged that the value of the supply of goods shall be considered to be 70% of the gross consideration charged for all such supplies if the goods are supplied along with supplies of service by way of installation or other technical services concerning the setting up of Solar power-based devices. The value of the taxable service shall be considered the remaining 30% of the gross consideration charged. 30% of the gross consideration will be subject to 18% GST on services, while 70% would be subject to 12% GST on products.

The AAR held that the product does not include installation or maintenance service with it. The buyer can seek help from any local vendor to install and keep maintenance of the product. Therefore, the applicant does not provide any service with the product in question. The applicant just wants to sell the product that is ‘Solar Home Lighting System’. 12% GST imposed on the product.