Andhra Pradesh High Court Holds Solar Power EPC Contract Eligible for 8.9% GST, Quashes 18% Demand

The Andhra Pradesh High Court has recently ruled that contracts for setting up solar power generating systems cannot be taxed at 18% GST merely because they involve erection and commissioning work.

Holding that such contracts are covered by a concessional GST notification, the court said tax must be levied at an effective rate of 8.9% and set aside a higher assessment raised by GST authorities.

A division bench of Justices R. Raghunandan Rao and T.C.D. Sekhar said the benefit of the concessional rate for solar power equipment does not disappear simply because the supply of goods is bundled with services.

The bench made it clear that the notification applies regardless of how the contract is classified.

It observed, “the provision of entry No.234 of Schedule-I in Notification No.1/2017 would be clearly applicable to the present case, irrespective of the fact whether the contract is a works contract relating to immoveable property or a composite supply of goods and services.”

The case concerned Vikram Solar Ltd., which undertakes contracts for supplying, installing, and maintaining solar power generating systems. For the period from April 2018 to March 2020, GST authorities taxed Vikram Solar's contracts at 18%, treating them as works contracts linked to immovable property. After an assessment order was issued in November 2024, the company moved the High Court in appeal.

According to it, its contracts are squarely covered by a central GST notification that allows a concessional rate for solar power generating systems and their parts. It pointed to an explanation added to the notification from January 1, 2019, which requires the contract value to be split, with 70% treated as supply of goods taxable at 5% and the remaining 30% treated as services taxable at 18%. The GST department opposed this, saying that the concession applied only when goods were supplied on their own and not when services dominated the transaction.

The High Court rejected that argument, noting that the assessment itself dealt with the erection and commissioning of a solar power system. The bench relying on the 2019 notification observed that where goods are supplied along with services, “the gross consideration should be split into 70% attributable to supply of goods and 30% attributable to supply of services.”

It accordingly set aside the assessment and remanded the matter for fresh assessment at a uniform rate of 8.9%.

Case Title: Vikram Solar Limited v. The Commissioner of Central Tax

Citation: 2026 LLBiz HC (APH) 7

Case Number: WRIT PETITION NO: 4420/2025

For Petitioner: Advocate Lakshmi Kumaran Sridharan 

For Respondent: Senior Standing Counsel Santhi Chandra, for CBIC, Y N Vivekananda