Classification of Grid-Supplied Electricity: GST Exemptions and Input Tax Credit

The Authority classified grid-supplied electricity as goods and determined that the supply of electricity and utilities are separate supplies, not composite. Grid-supplied electricity falls under Entry No. 104 of a specific notification and is exempt from GST, while electricity supplied via DG sets is subject to 18% GST. Input tax credit is available for renting services but limited to electricity supplied through DG sets.

---

---

Issues Involved:
1. Classification of the supply of electricity as goods or services.
2. Determination of whether the supply of electricity and supply of utilities/leasing are separate supplies or composite supplies.
3. Classification of the supply of electricity for the purpose of GST payment.
4. Eligibility for input tax credit on the supply of renting services and electricity.

Issue-wise Detailed Analysis:

1. Classification of the Supply of Electricity as Goods or Services:

The applicant contended that electricity qualifies as "goods" under Section 2(52) of the CGST Act, supported by the Supreme Court's decision in Commissioner of Sales Tax v. Madhya Pradesh Electricity Board and Notification No. 2/2017-Central Tax (Rate), which exempts intra-State supply of electrical energy. The Authority agreed, stating, "electricity is a goods and not a service." However, electricity supplied via DG sets was classified as a "service" due to the nature of its provision and maintenance by Agilent.

2. Determination of Whether the Supply of Electricity and Supply of Utilities/Leasing are Separate Supplies or Composite Supplies:

The applicant argued that the supplies under the agreements with Agilent are separately identifiable and do not qualify as a mixed or composite supply as per Sections 2(30) and 2(74) of the CGST Act. The Authority concurred, noting that the supply of utilities and electricity are "neither naturally bundled together nor are they supplied in conjunction with each other." Therefore, they are separate supplies, not composite.

3. Classification of the Supply of Electricity for the Purpose of GST Payment:

The Authority clarified that electricity supplied through the grid is classified under Entry No. 104 of Notification No. 2/2017-Central Tax (Rate), dated 28th June 2017, Tariff Code-2716 00 00, and is exempt from GST. Conversely, electricity supplied via DG sets is considered a taxable service, subject to GST at 18%.

4. Eligibility for Input Tax Credit on the Supply of Renting Services and Electricity:

The applicant sought clarity on input tax credit eligibility under Section 16(1) of the CGST Act. The Authority confirmed that the applicant is eligible for input tax credit on the supply of renting services, as these are used in the course of business. However, input tax credit for electricity is restricted to the supply made through DG sets, as grid-supplied electricity is exempt from GST.

Ruling:

1. The supply of electricity, to the extent it is grid supplied, is classified as goods.
2. The supply of electricity through the grid and the supply of utilities are separate supplies.
3. The supply of electricity through the grid is classified under Entry No. 104 of Notification No. 2/2017-Central Tax (Rate), dated 28th June 2017, Tariff Code-2716 00 00.
4. The applicant is eligible to take input tax credit on the supply of renting services. Input tax credit for electricity supply is restricted to the supply made through DG sets.

---