GST Update

 Desk of CA. Praveen Sharma – 1011 Series (CAPS) 

ANDHRA PRADESH HIGH COURT IN THE CASE OF Tata Power Renewable Energies Limited

The petitioner is engaged in supplying solar power generating systems along with related services such as design, installation, testing, commissioning, and maintenance. 

The petitioner had been regularly filing returns and discharging tax based on a prescribed valuation mechanism where 70% of the total contract value is treated as goods and taxed at a concessional rate, while the remaining 30% is treated as services and taxed at a higher rate, resulting in an effective tax rate.

The department issued a notice alleging that the entire transaction should be taxed at a higher uniform rate on the ground that separate invoices were raised for goods and services. Based on this view, a substantial tax demand along with interest and penalty was raised.

The petitioner challenged this action, contending that the supply was a composite contract for solar power systems and that the prescribed valuation mechanism should apply irrespective of invoicing patterns. It was also argued that all supplies were executed under a single contract and the benefit of concessional taxation cannot be denied merely due to separate billing.

The Court observed that the applicable provisions clearly create a legal framework where such supplies must be taxed using the 70:30 valuation principle. It held that raising separate invoices does not alter the nature of the transaction when the supply is executed under a single contract.

The Court further noted that the department failed to properly analyze the value of goods and services and instead applied a blanket higher tax rate without justification.

Accordingly, the assessment order was set aside, and relief was granted to the petitioner.

LINK: CA. Praveen Sharma on Linkedin

Regards
CAPS