Page 158 - GSTL_23rd July 2020_Vol 38_Part 4

524 GST LAW TIMES [ Vol. 38
abundantly clear that the term “equipment” does not cover “free is-
sue equipment”, Therefore, the contract itself recognises the supply
by the owner as a distinct transaction which is separate from the
supply of the other equipment and components by the contractor.
To this extent the AAR was right in the impugned order in holding
that the concept of natural bundling does not apply to the instant
envisaged supply of the PV module in terms of the draft contract in
question.
28. Once the contract in question is that of a multistage supply as
already discussed, having been already vivisected into the supply
of the PV module by the owner as free issue to the appellant, what
remains to be executed by the appellant is undertaking the supply
of the remaining equipment and components and parts of the Solar
Power Plant and supplying the services of design, erection, installa-
tion and commissioning of the Solar Power Plant. We are of the
opinion that the supply of this remaining portion of the contract in
question (involving the supply of the balance components and parts
as well as the service portion) can still be termed as a ‘composite
supply’ in terms of Section 2(30) of the CGST Act, 2017, since the
supply of these components and parts as well as the services of
erection, installation and commissioning appear to be naturally
bundled. Having said this, the tax liability on the latter portion of
the contract in question which is to be supplied by the appellant
and which we are agreeable to be termed as a composite supply
will be determined on the basis of the dominant nature of the sup-
ply. In other words, if the dominant nature of the remaining portion
of the contract in question which is executed by the appellant is
principally a supply of services of design, erection, installation and
commissioning, then the tax rate will be the rate as applicable to the
services if they form the principal supply of the remaining portion
of the contract. It has never been contended before us that for the
balance part of the supply under the contract in question, the goods
element of what we agree to call a ‘composite supply’ are the pre-
dominant or principal component in the transaction. We modify the
ruling of the Advance Authority in the impugned order to the
above extent. It is emphasised that the discussions and findings as
detailed above are limited to the facts involved in the contract in
question.
29. As regards the question whether the benefit of concessional
rate of 5% GST on the supply of solar power generating systems
and its parts will apply to the sub-contractors, we are of the view
that the supplies made by the sub-contractor to the appellant are
independent supplies. If the supply by the sub-contractor to the ap-
pellant is of goods which can be termed as ‘parts of the Solar Power
Generating System, then the rate applicable will be 5% in terms of
Sr. No. 234 of Notification No. 1/2017-Integrated Tax (Rate), dated
28-6-2017. However, if the supply by the sub-contractor to the ap-
pellant is a composite supply, then the rate applicable to the domi-
nant nature of the supply will prevail. We are in agreement with the
finding of the AAR on this and uphold the same.
30. In view of our findings and discussions as above, the Ruling
dated 21-3-2018 of the Karnataka Authority for Advance Ruling is
modified as under :
(a) The supply of the PV module which is the major component
of the Solar Power Plant is not naturally bundled with the
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