GST on Solar Power Systems Restricted to 70:30 Split – 18% Levy on Entire Value Invalid

Centax Editorial Board

June 2, 2026

• 2 min. read

Case Details: Tata Power Renewable Energies Ltd. vs. Union of India (2026) 42 Centax 383 (A.P.)

Judiciary and Counsel Details

- R Raghunandan Rao & T.C.D. Sekhar, JJ.
- S/Shri Kumar Visalaksh & Doddala Prudhvi Teja, learned counsels for the Petitioner.

Facts of the Case

The petitioner is engaged in the supply of solar power generating systems and solar power-based devices along with allied services such as design, installation, testing, commissioning, and maintenance. For the period 2020-21, it discharged GST liability by applying the valuation mechanism prescribed under Entry 234 of Notification No. 1/2017-CT (Rate) and Entry 38 of Notification No. 11/2017-CT (Rate), under which 70% of the gross consideration is deemed to be the value of goods taxable at 5% and the remaining 30% is deemed to be the value of services taxable at 18%, resulting in an effective tax incidence of 8.9%. Subsequently, the department issued a show-cause notice under section 74 and passed an assessment order demanding GST at 18% on the entire consideration, on the ground that the petitioner had issued separate invoices for goods and services and had classified the supplies under different HSN codes. The department therefore denied the benefit of the statutory 70:30 valuation mechanism and raised tax, interest, and penalty demands. The petitioner challenged the assessment order before the High Court.

High Court Held

The Andhra Pradesh High Court held that the explanations inserted in Entry 234 of Notification No. 1/2017-CT (Rate) and Entry 38 of Notification No. 11/2017-CT (Rate) create a legal fiction whereby, in supplies relating to solar power generating systems, 70% of the gross consideration is deemed to represent the value of goods and 30% the value of services. The Court observed that the applicability of this statutory mechanism cannot be defeated merely because separate invoices were issued or different HSN codes were adopted. Even assuming that goods and services were supplied separately, the department could not levy GST at 18% on the entire turnover without first determining the respective values of goods and services. Relying on its earlier decision in Sterling and Wilson Pvt. Ltd. v. Joint Commissioner, the Court held that the petitioner was entitled to discharge GST liability in accordance with the prescribed 70:30 split mechanism. Accordingly, the assessment order was set aside to the extent it levied GST at the differential rate of 18% on the entire consideration, and the writ petition was allowed.