Electricity transmission exemption does not cover separately charged infrastructure and allied recoveries, which remain taxable as distinct services.
Optional and separately charged infrastructure works linked to electricity transmission are not treated as part of the exempt supply of transmission of electricity. The AAR held that construction or erection of bays, substations, overhead lines and underground cables, along with pro-rata, supervision, line, registration, and operation and maintenance charges, are not naturally bundled with transmission service and therefore do not form a composite supply. The exemption for transmission or distribution of electricity applies only to the transmission service itself, while the ancillary recoveries are taxable under the relevant construction service heading or the residual category, as applicable.
Issues: Whether the amounts recovered by the applicant from consumers towards construction or erection of bays, sub-stations, overhead lines and underground cables, and towards pro-rata charges, supervision charges, proportionate line charges, registration fees and operation and maintenance charges, form part of the value of the exempt supply of transmission of electricity.
Analysis: The applicant, though engaged in transmission of electricity, also undertakes optional construction and erection of transmission infrastructure for consumers and recovers the actual cost together with supervision charges. Such activity is not naturally bundled with transmission of electricity and is not a composite supply. The exemption for transmission or distribution of electricity applies only to that service and not to construction, erection, commissioning or installation of infrastructure. The additional charges recovered for facilitating electric lines or electrical plant and other related facilities are ancillary services and do not fall within the exemption entry for transmission of electricity. They are taxable under the relevant construction service heading or under the residual category, as the case may be.
Conclusion: The recovered construction, erection and allied charges do not form part of the value of the exempt transmission service. The amounts recovered towards construction or erection are taxable as construction services, and the other ancillary charges are also taxable and not exempt.
Final Conclusion: The applicant cannot treat the disputed recoveries as part of exempt transmission of electricity, and GST is payable on the non-exempt recoveries according to their respective service classifications.
Ratio Decidendi: Optional and separately charged infrastructure-related activities are not a composite supply of transmission of electricity and do not inherit the exemption available to the principal transmission service.
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