2020 (4) TMI 869 - AAR - GST

Advance Ruling Authority defers decision on taxability of electricity charges due to pending Supreme Court case

In Re: M/s. Chamundeshwari Electricity Supply Corporation Limited

The Advance Ruling Authority refrained from ruling on the taxability of various charges related to the supply and distribution of electricity as the issue ... Levy of GST - Administration fees - post connection fees - pre-connection fees - same matter pending decision - HELD THAT:- The applicant will fix and recover non-tariff charges as per provisions of the Karnataka Electricity Act 2003 and regulations of the KERC and Karnataka Electricity Regulatory Commission (KERC) 1999 - As per Circular no. 34/8/2018-GST dated 1st March, 2018 issued by Ministry of Finance, Government of India, it was clarified that the services by way of transmission or distribution of electricity by an electricity transmission or distribution utility is only exempted as per entry number 25 of notification No. 12/2017- CT (R) dated 28.06.2017 and other services provided by the applicant to consumer are taxable - it was clarified in the circular that the other services such as meter rent, application fees, testing fees for meters etc. provided by these companies to their consumers are taxable. The facts of the judgment is narrated that the ancillary charges collected by Electricity Distribution Company towards application fee, meter rent, other pre and post connection charges for shifting of lines, etc are covered by entry 25 of exemption notification number 12/2017-Central Tax (Rate) dated 28-06-2017 relating to transmission and distribution of electricity. Hence the same would constitute composite supply as per section 8 of the GST Act. The issue of the exemption activities carried out by the applicant with reference to administration and Pre and Post connection charges towards supply of electricity is pending before Honorable Supreme Court of India vide UNION OF INDIA AND ORS. VERSUS TORRENT POWER LTD. AND ANR. [2019 (8) TMI 779 - SC ORDER] - Since the matter is sub-judice therefore advance ruling on aforesaid issue cannot be given. Issues Involved:1. Taxability of various charges collected by the applicant in relation to the supply and distribution of electricity.2. Interpretation of the exemption for transmission or distribution of electricity under GST law.3. Applicability of Circular No. 34/8/2018-GST and related judicial precedents.Issue-wise Detailed Analysis:1. Taxability of Various Charges Collected by the Applicant:The applicant, a limited company engaged in the distribution of electricity, sought an advance ruling on the taxability of 91 different charges related to pre-connection, post-connection, and administrative services. These charges include fees for RTI applications, departmental exams, EMD, interest on bank deposits, rebates, penalties, and various fees related to electricity supply and maintenance.2. Interpretation of the Exemption for Transmission or Distribution of Electricity:The applicant argued that the transmission or distribution of electricity is exempt from GST under entry number 25 of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017. The applicant contended that since they are a distribution licensee under the Electricity Act, 2003, they fall within the definition of 'electricity transmission or distribution utility,' and thus, their ancillary charges should also be exempt as they constitute a 'composite supply' with electricity as the principal supply.3. Applicability of Circular No. 34/8/2018-GST and Related Judicial Precedents:The Ministry of Finance issued Circular No. 34/8/2018-GST on 1st March 2018, clarifying that only the transmission or distribution of electricity is exempt, while other services such as application fees, meter rent, testing fees, and charges for duplicate bills are taxable. This view was upheld by the AAR Rajasthan in the case of M/s Tp Ajmer Distribution Limited, which ruled that non-tariff charges are taxable.However, the Gujarat High Court in the case of M/s Torrent Power Limited quashed the circular, stating that ancillary charges related to the distribution of electricity fall under the exemption notification. The department has filed a special leave petition in the Supreme Court against this judgment, which is currently pending.Ruling:Given that the issue of the exemption for ancillary charges related to the supply of electricity is pending before the Supreme Court of India (Diary No(s). 24733/2019), the Advance Ruling Authority refrained from giving a ruling on the matter, citing it as sub-judice.