Case Of: Vikram Solar Limited
Issued By: Andhra Pradesh High Court
Order No: WP/4420/2025
Date: 3rd Dec 2025
The petitioner challenged a GST assessment order for FY 2018–19 and 2019–20, wherein the tax department treated turnkey contracts for supply and installation of solar power projects as works contracts relating to immovable property, taxable at 18%.
The core dispute arose from the classification of the transaction: the assessee contended that the contracts involved supply of solar modules and related goods along with ancillary services, and not a pure works contract resulting in immovable property.
The department rejected the concessional GST rate claimed by the assessee and denied the benefit of notifications applicable to solar power generating systems, leading to a substantial tax demand.
Aggrieved by the assessment, the petitioner approached the High Court under Article 226, contending that the assessing authority failed to correctly apply the relevant GST notifications and binding clarifications governing taxation of solar power projects.
The High Court observed that the GST framework contains specific rate notifications prescribing a deemed bifurcation of consideration for solar power projects, allocating 70% to goods and 30% to services, and held that the assessing authority erred in mechanically taxing solar EPC contracts at 18% without applying this statutory mechanism.
While the Court examined the long-standing controversy on whether solar EPC contracts result in immovable property, it consciously kept this issue open, noting that subsequent rate notifications effectively tax solar installation contracts at an 8.9% rate based on the 70:30 split, thereby reducing the relevance of the immovable–movable debate for rate determination.
The Court rejected the department’s contention that the benefit of the 70:30 bifurcation applies only where the entire solar power system is supplied, holding that even contracts involving supply of solar devices or parts along with services are entitled to the same concessional treatment.
The Court held that denial of concessional GST without a reasoned examination of the applicable notifications and circulars was legally unsustainable, set aside the assessment order, and remanded the matter for fresh adjudication.