GST invoicing guide for solar EPC contractors in India

GST compliance for solar EPC contractors in India is more complex than for most businesses. You're dealing with a combination of goods supply (solar panels, inverters, cables) and services (design, installation, commissioning), each potentially attracting different GST rates. Add reverse charge mechanism, place of supply rules, and milestone billing, and it's easy to see why many contractors get this wrong.

This guide covers the essentials of GST invoicing for solar EPC companies.

GST rates applicable to solar EPC

Solar equipment was brought to 12% GST in 2022, up from the earlier 5% concessional rate. Here's a quick reference:

*When solar EPC is a composite supply — i.e., the contract includes both goods and installation, and installation is incidental to the supply of goods — the entire contract can be classified under 9954 at 12%. This is disputed territory and several AAR rulings have gone both ways. If your average contract value is significant, get a tax consultant's opinion on your specific business structure.

CGST vs SGST vs IGST

The split depends on whether the supply is intra-state or inter-state:

• **Intra-state** (contractor and client in the same state): CGST + SGST, each at half the applicable rate. For 18% GST: 9% CGST + 9% SGST.
• **Inter-state** (contractor and client in different states): IGST at the full rate. For 18% GST: 18% IGST.

Your invoice must show the correct split based on the place of supply — which for installation services is where the installation happens.

What a valid GST invoice must contain

A tax invoice under GST must include:

1. Supplier details — name, address, GSTIN 2. Invoice number — sequential, financial-year-wise (e.g., SOL/2024-25/0045) 3. Invoice date 4. Recipient details — name, address, GSTIN (if registered) 5. Place of supply — state name and code 6. HSN/SAC code for each line item 7. Quantity and unit for goods 8. Taxable value per line item 9. GST rate and amount — CGST + SGST or IGST 10. Total invoice value including GST 11. Whether reverse charge applies 12. Signature or digital signature

Missing any of these makes the invoice non-compliant, and your client can't claim ITC on it.

Milestone billing for EPC contracts

Solar EPC contracts are typically billed in milestones: - Advance/mobilisation — 20–30% on signing - Material delivery — 30–40% on delivery of major equipment - Installation complete — 20–30% after physical installation - Commissioning — balance on grid connection and handover

Each milestone triggers a GST invoice. Some contractors issue a single contract invoice at the end — this is wrong and creates cash flow problems. Invoice at each milestone as the payment is due.

For advance payments, you may need to issue a receipt voucher (not a tax invoice) at the time of advance, and convert it to a tax invoice when the supply is made.

Input Tax Credit for solar EPCs

As a GST-registered EPC contractor, you can claim ITC on: - Materials purchased for the project (panels, inverters, cables, etc.) - Services purchased for the project (transport, labour contractors if GST-registered) - Office expenses, professional fees, etc.

You cannot claim ITC if: - Your supplier is unregistered (you may be liable for RCM — see below) - The goods/services are used for non-business purposes - You hold invoices but your supplier hasn't filed their GSTR-1 (your ITC will be blocked in GSTR-2B)

Chase your suppliers for GSTR-1 filing compliance. Blocked ITC is effectively a cost to your business.

Reverse Charge Mechanism (RCM)

If you hire unregistered labour contractors for installation work, you're liable to pay GST under RCM — the recipient (you) pays the tax instead of the supplier.

RCM rate for labour services from unregistered suppliers: 18% (SAC 9954).

You must self-invoice for RCM purchases, pay the tax to the government, and then claim it back as ITC — provided you're eligible.

Common mistakes to avoid

Wrong place of supply. For installation services, place of supply is where the installation happens, not where your office is. Getting this wrong means the wrong tax is deposited with the wrong state government.

Incorrect HSN codes. Using a wrong HSN code can lead to a GST rate mismatch — paying less or more than required. Verify HSN codes with a CA.

Issuing invoices in the wrong financial year. If you complete work in March but issue the invoice in April, the GST liability falls in the new year. This can create mismatches in returns.

Not issuing invoices for advances. Advances trigger GST liability. Many contractors ignore this and face penalties during audits.

Mixing project and personal expenses. Keep a separate bank account and accounting for each legal entity. Mixed books create ITC claim issues.

Practical advice

1. Use GST invoicing software that auto-calculates CGST/SGST/IGST based on place of supply 2. Maintain a GST calendar — GSTR-1 due dates, GSTR-3B due dates 3. Reconcile GSTR-2B with your purchase register every month before filing 4. For large contracts, get a written opinion from a CA on composite vs. non-composite classification

GST compliance for solar EPC is manageable — it just requires a disciplined approach and the right tools. Solset CRM's invoicing module handles CGST/SGST/IGST splits automatically and generates PDF invoices that meet all statutory requirements.