Diesel-generator power back-up at an IT/ITES building is taxable as a service, not nil-rated electrical energy.

Supply of diesel-generator-based power back-up at an IT/ITES building was not treated as electrical energy eligible for the nil-rate entry in Notification No. 2/2017-Central Tax (Rate). The supplier was only providing backup power with diesel, lubricants, maintenance and meter-based billing arrangements, and was neither an electricity generating agency nor an electricity distributing agency. On those facts, the activity was characterised as a taxable service, falling under property management related services, rather than a supply of goods in the form of electrical energy.

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Issues: Whether the supply of electrical energy through diesel generators at an IT/ITES building is covered by the nil-rate entry for electrical energy, or whether the activity is a taxable service.

Analysis: The supply claimed by the applicant was examined in the light of Entry No. 104 of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017, which grants nil rate to electrical energy. The activity was found to be only provision of power back-up services. The applicant was neither an electricity generating agency nor an electricity distributing agency, and it only arranged diesel, lubricants, maintenance and meter-based billing for occupants. On these facts, the activity was held not to amount to supply of goods in the form of electrical energy. Instead, the service was found to fall within property management related services under the relevant heading for services.

Conclusion: The nil-rate entry for electrical energy was held inapplicable, and the activity was held taxable as a service.

Final Conclusion: The application was decided against the applicant, and the supply of power back-up through diesel generators was held liable to GST as a service rather than as exempt electrical energy.

Ratio Decidendi: Where a supplier only provides diesel-generator-based power back-up with ancillary billing and maintenance arrangements, the activity is a service and not a supply of electrical energy eligible for nil-rate exemption.

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