07052026 Andhra Pradesh High Court Reaffirms Composite Supply Treatment For Solar Power Projects Separate Invoices Not G
On May 7, 2026, the Andhra Pradesh High Court upheld that solar power projects are composite supplies, even with separate invoicing.
The Andhra Pradesh High Court has reaffirmed that Goods and Services Tax (GST) on solar power projects should be treated as a composite supply, regardless of separate invoices issued for different components. This ruling addresses the classification of solar power projects, where developers often issue separate invoices for the supply of goods (solar panels, inverters) and services (installation, engineering). The court's decision clarifies that these projects constitute a single, indivisible supply, attracting GST at the rate applicable to the principal supply, which is typically the supply of the solar power generating system itself. This ruling provides clarity for solar power developers operating in Andhra Pradesh, ensuring uniform GST treatment and potentially reducing disputes with tax authorities. The decision impacts how these projects are taxed and how input tax credit (ITC) is claimed.
Section 2(30) of the CGST Act, 2017 defines composite supply as a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services, or both, that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Incorrect classification can lead to demands, interest, and penalties under Section 73 or 74 of the CGST Act.
This ruling could set a precedent for similar projects across India, potentially leading to a more uniform GST treatment nationwide. Tax authorities might scrutinize past transactions to ensure compliance with the composite supply principle, potentially leading to reassessments and demands. CFOs should proactively assess their GST positions to mitigate future risks.
This ruling provides clarity on GST treatment for solar power projects, reducing ambiguity and potential litigation for developers. It ensures consistent application of GST laws across the sector in Andhra Pradesh.