GST Applicable on Power Supply between Related Parties: AAR Ruling

The Authority for Advance Rulings (AAR) determined that GST is applicable on the supply of power by JEL to JSL as the conversion of coal into electricity constitutes a new product falling under "manufacture." The supply of power between related parties is treated as a taxable supply under the CGST Act. Since the activity amounts to the manufacture of electricity, charges payable by JSL to JEL are for the supply of goods, not job work services. The AAR did not entertain the question regarding the applicability of GST on the supply of coal or inputs on a job work basis by JSL to JEL.

---

---

Issues Involved:
1. Applicability of GST on supply of coal or any other inputs on a job work basis by JSL to JEL.
2. Applicability of GST on supply of power by JEL to JSL.
3. Applicability of GST on job work charges payable to JEL by JSL.

Issue-wise Detailed Analysis:

1. Applicability of GST on Supply of Coal or Any Other Inputs on a Job Work Basis by JSL to JEL:
The Authority for Advance Rulings (AAR) noted that the question pertains to the supply by JSL and not JEL, the applicant. As per Section 95 of the GST Act, an advance ruling must relate to the supply of goods or services undertaken or proposed to be undertaken by the applicant. Therefore, this question was not entertained by the AAR.

2. Applicability of GST on Supply of Power by JEL to JSL:
The AAR examined whether the conversion of coal into electricity by JEL could be classified as a job work. The definition of "job work" under Section 2(68) of the CGST Act involves undertaking any treatment or process on goods belonging to another registered person. The AAR found that the conversion of coal into electricity results in a new product, which falls under the definition of "manufacture" as per Section 2(72) of the CGST Act. The transformation from coal to electricity is a complete change in the identity of the goods, thus not qualifying as a job work. As JSL and JEL are related persons, the supply of power by JEL to JSL is treated as a supply under Schedule I of the CGST Act, even if made without consideration. Therefore, GST is applicable on the supply of power by JEL to JSL.

3. Applicability of GST on Job Work Charges Payable to JEL by JSL:
Given that the transaction between JEL and JSL is classified as a supply of goods (electricity) and not a job work, the question of GST on job work charges does not survive. The AAR concluded that the activity undertaken by JEL amounts to the manufacture of electricity from coal, and thus, the charges payable by JSL to JEL are for the supply of goods, not job work services.

Order:
1. The question regarding the applicability of GST on the supply of coal or any other inputs on a job work basis by JSL to JEL was not entertained as it pertains to the supply by JSL.
2. GST is applicable on the supply of power by JEL to JSL.
3. The transaction between JEL and JSL is a supply of goods and not a job work; hence, the question of GST on job work charges does not survive.

---