2019 (3) TMI 917 - AAAR - GST

Appellate ruling: No GST on delayed electricity payment charges; GST applies to cheque dishonor fees

In Re: T.P. Ajmer Distribution Limited

The appellate authority ruled that no GST is chargeable on delayed payment charges for electricity bills as the supply of electricity is exempt. However, ... Levy of GST - valuation - order of AAR challenged - collection of delayed payment charges - cheque dishonor fee - tolerating the situation of dishonor of cheques - inclusion as payment of consideration for supply of electricity - Condonation of delay in filing appeal - Section 100(2) of the CGST Act - case of appellant is that the Taxation matter of the appellants are looked after by Mr. Kailash Mali. Since, Mr. Kailash Mali was busy in the Quarterly Audit, the Appeal against the impugned Advance Ruling could not be filed within the aforementioned time limit - Held that:- The delay is considered reasonable and is condoned. Levy of GST - delayed payment charges collected from the consumers for delay in payment of consideration for supply of electricity - Section 15(2) of the CGST Act, 2017 - Held that:- The value of supply is the consideration charged by the appellants from the consumers of electricity on account of consumption of electricity by them. Coming to the taxability of the supply of electricity, we find that electrical energy has been classified under tariff item No. 27160000 under Customs Tariff Act, 1975 and value of its supply has been exempted vide entry No.104 of the notification No. 02/2017- Central Tax (Rate) dated 28.06.2017 - As per Section 15(2) ibid, delayed payment charges should form part of the value of supply of electricity. When value of supply of electricity itself stands exempted by virtue of the above exemption notification dated 28.06.2017 incremental value (i.e. consideration for delalyed payment of the electricity bills as discussed above) would also remain exempted. Levy of GST - cheque dishonor fee collected by the appellants - Held that:- If any person tolerates any act or a situation and recovers a certain amount for such tolerance then it is supply of service. In the instant case, the appellants is tolerating the situation of dishonor of cheques, tendered by the consumers of electricity for payment of electricity bill, by charging certain amount from the consumers, hence, it is a supply of service in terms of the above clause 5(e). Needless to mention that Banks are also paying GST on the charges (by whatever name) received from customers when their cheques gets dishonoured - cheque dishonor charges, being a supply of service and not exempted anywhere, appropriate GST is chargeable on the value of its supply. Issues Involved:1. Condonation of delay in filing the appeal.2. Taxability of delayed payment charges under Section 15(2) of the CGST Act, 2017.3. Taxability of cheque dishonor fee collected by the appellants.Condonation of Delay:The appellants filed the appeal beyond the stipulated 30-day period, citing their lack of detailed understanding of the CGST Act provisions and the Chief Finance Officer's engagement in quarterly audits. The delay of 29 days was condoned by the authority, accepting the appeal for disposal.Taxability of Delayed Payment Charges:The appellants argued that delayed payment charges, collected for the delay in payment of electricity bills, should not be taxable under GST. They contended that these charges are akin to interest on the consideration for the supply of electricity, which is exempt from GST under Notification No. 2/2017-Central Tax (Rate) dated 28.6.2017. The AAR had previously ruled that such charges are includible in the value of supply under Section 15(2)(d) of the CGST Act and thus taxable.Upon review, the appellate authority noted that the value of supply includes interest or late fees for delayed payment of any consideration. Since the supply of electricity is exempt from GST, the incremental value from delayed payment charges should also remain exempt. Therefore, the authority ruled that no GST is chargeable on the delayed payment charges.Taxability of Cheque Dishonor Fee:The appellants argued that the cheque dishonor fee is a penal charge and not a consideration for any supply, hence not liable to GST. The AAR had ruled that this fee is a consideration for 'tolerating an act,' thus taxable under Clause 5(e) of Schedule II to the CGST Act.The appellate authority agreed with the AAR, stating that the fee collected for dishonored cheques is a supply of service under Clause 5(e) of Schedule II. This clause treats the act of tolerating a situation (like cheque dishonor) as a supply of service. Since this service is not exempt, GST is applicable on the cheque dishonor charges.Ruling:The appellate authority concluded that:1. No GST is chargeable on the delayed payment charges collected for the delay in payment of electricity bills.2. GST is chargeable on the cheque dishonor charges collected from consumers.The appeal was disposed of accordingly.