My Trah Energy India Private Limited Vs Union of India – AP High Court Strikes Down Retrospective Application of 70:30 GST Split on Solar EPC Contracts
Background and Context of the Dispute
The Andhra Pradesh High Court recently delivered a significant ruling in My Trah Energy India Private Limited Vs Union of India, addressing a contested issue in the solar energy sector — whether the 70:30 bifurcation of tax liability under GST on solar Engineering, Procurement, and Construction (EPC) contracts could be enforced retrospectively against an assessee by the tax authorities.
The petitioner in this case was engaged in the business of manufacturing and installing solar panels along with solar power generating systems. Assessment proceedings were initiated against the assessee covering the period from March 2018 to April 2019, by the 2nd respondent (the assessing authority). While the writ petition was already pending before the Court — originally challenging the jurisdiction of the assessing authority — the authority proceeded to pass an assessment order dated 11.07.2024. The assessee consequently amended the writ petition to incorporate a challenge against this freshly passed order as well.
The Tax Structure Applied by the Assessing Authority
The assessing authority sought to impose a bifurcated tax structure on the assessee's turnover. Relying on an explanation inserted into Notification No. 24/2018, which came into effect from 01.01.2019, the authority applied:
- 5% GST on 70% of the total turnover — treating this portion as supply of goods
- 18% GST on 30% of the total turnover — treating this portion as supply of taxable services
This bifurcation flows from the explanation appended to Sl. No. 234 of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017, which originally covered non-conventional and renewable energy devices including solar panels, solar power generating systems, windmills, and photovoltaic cells.
The explanation, as inserted, reads:
"Explanation: If the goods specified in this entry are supplied, by a supplier, along with supplies of other goods and services, one of which being a taxable service specified in the entry at S. No. 38 of the Table mentioned in the notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 [G.S.R. 690(E)], the value of supply of goods for the purposes of this entry shall be deemed as seventy per cent. of the gross consideration charged for all such supplies, and the remaining thirty per cent. of the gross consideration charged shall be deemed as value of the said taxable service."
The Assessee's Position — Composite Supply at 5%
The assessee strongly contested the authority's approach. The primary argument advanced was that all supplies made during the installation of solar panels and solar power generating systems constituted a "composite supply" within the meaning of Section 2(30) of the GST Act. Consequently, under Section 8 of the GST Act, the entire composite supply should attract GST at the rate applicable to the principal supply — which, in this case, would be 5% as stipulated under Sl. No. 234 of Notification No. 1/2017.
The assessee raised two specific objections against the authority's insistence on the 70:30 split: