Introduction

The case of Apar Industries Limited v. Authority for Advance Rulings revolves around the applicability of a concessional Goods and Services Tax (GST) rate of 5% on the supply of HT XLPE & LT XLPE Cables designed for Solar Power Generating Systems. Apar Industries Ltd., a manufacturer of specialized cables, sought an advance ruling to determine their tax liability under Schedule I, Entry No. 234 of Notification No. 01/2017-Integrated Tax (Rate) dated June 28, 2017. The primary contention was whether these cables, classified under Chapter 85 of the Customs Tariff Act, are integral parts of Solar Power Generating Systems and thus eligible for the concessional GST rate. However, the Authority for Advance Rulings (AAR) denied the ruling due to insufficient documentation provided by Apar Industries Ltd.

Summary of the Judgment

Apar Industries Limited applied for an advance ruling seeking clarification on whether their HT XLPE & LT XLPE Cables could be taxed at a concessional GST rate of 5% under Schedule I, Entry No. 234, considering the cables are integral to Solar Power Generating Systems. The applicant provided various submissions, including purchase orders, technical specifications, and references to similar advance rulings. Despite these efforts, the AAR concluded that Apar Industries Ltd. had not furnished essential documents such as the original purchase order, contracts, or tenders necessary to substantiate their claim. Consequently, the AAR ruled that it could not provide a definitive opinion on the applicability of the concessional GST rate due to the lack of complete documentation.

Analysis

Precedents Cited

Apar Industries Ltd. referred to several advance ruling cases to support their claim:

• Order No. 07/2018-19 dated 28.08.2018 by AAR Uttarakhand in the case of Eapro Global Limited, Roorkee.
• Order No. 15/2018-19 dated 23.01.2019 by AAR Uttarakhand in the case of Premier Solar Systems (P) Ltd., Dehradun.
• Order No. Giriraj Renewables (P) Ltd. - AAAR(146) AAR Karnataka (215).

However, the AAR emphasized that decisions from other advance ruling authorities are not binding unless they pertain directly to the same applicant, as per Section 103 of the CGST Act, 2017.

Legal Reasoning

The AAR undertook a thorough examination of the provisions under Notification No. 01/2017-Integrated Tax (Rate) and its amendments. Key points in their legal reasoning included:

• Classification of Goods: The cables were correctly classified under Sub-heading 8544 of Chapter 85 of the Customs Tariff Act, which pertains to insulated cables.
• Eligibility for Concessional Rate: To qualify for the 5% GST rate under Schedule I, Entry No. 234, the goods must be parts of specified renewable energy devices, including Solar Power Generating Systems.
• Documentation Requirements: The AAR highlighted the necessity of providing concrete evidence, such as supply contracts, purchase orders, and tenders, to establish that the cables are indeed used as integral parts of Solar Power Generating Systems.
• Amendments and Clarifications: Referencing Circular No. 80/54/2018-GST and subsequent amendments, the AAR underscored the importance of bifurcating the value of goods and services when both are supplied, affecting the GST applicability.

The pivotal issue was the lack of original purchase orders and contracts, which are essential to affirm that the supplied goods are part of the Solar Power Generating Systems. Without these documents, the AAR could not conclusively determine the eligibility for the concessional GST rate.

Impact

This judgment underscores the critical importance of submitting comprehensive documentation when seeking advance rulings for tax benefits. For manufacturers and suppliers aiming to avail concessional tax rates, this decision highlights:

• The necessity of providing original purchase orders, contracts, and tenders.
• The requirement to clearly demonstrate the integral use of goods within specified renewable energy systems.
• The limits of precedent rulings, emphasizing that prior decisions are not universally binding across different applicants.

Future cases involving concessional GST rates will likely see similar scrutiny regarding documentation, ensuring that tax benefits are appropriately and justifiably granted.

Complex Concepts Simplified

Goods and Services Tax (GST)

GST is a comprehensive indirect tax levied on the supply of goods and services. It is designed to be a single tax replacing various indirect taxes in India, making the tax system more streamlined and efficient.

Advance Ruling

An advance ruling is a decision provided by tax authorities on specific tax-related questions posed by taxpayers before they undertake any transaction. It offers clarity and certainty regarding tax liabilities.

Schedule I, Entry No. 234 of Notification No. 01/2017-Integrated Tax (Rate)

This specific entry under Schedule I outlines concessional GST rates applicable to certain renewable energy devices and their parts, including Solar Power Generating Systems. A concessional rate means a lower tax rate than the standard rate, intended to encourage specific industries or sectors.

Sub-heading 8544, Chapter 85 of the Customs Tariff Act

This classification pertains to insulated wires and cables, including XLPE (Cross-Linked Polyethylene) cables, which are used in electrical installations and systems.

Conclusion

The judgment in Apar Industries Limited v. Authority for Advance Rulings serves as a crucial reminder of the stringent documentation requirements for taxpayers seeking tax concessions. While Apar Industries Ltd. presented a compelling case for the concessional GST rate on their XLPE cables, the absence of essential documents like the original purchase order and contracts impeded their ability to secure the desired tax benefit. This case emphasizes the importance of thorough documentation and compliance with statutory requirements when applying for advance rulings to ensure clarity and legitimacy in tax matters. For stakeholders in the renewable energy sector, this ruling highlights the necessity of meticulous record-keeping and proactive engagement with tax authorities to facilitate favorable outcomes in similar tax-related applications.