AAR rejects Metro Rail Corporation's advance ruling application under Section 95 - only service suppliers can apply, not recipients

The AAR UP rejected an advance ruling application filed by Uttar Pradesh Metro Rail Corporation Limited regarding classification of utility shifting services provided by KESCO as part of electricity distribution services. The authority held that under Section 95 of CGST Act 2017, only the supplier of services can file an advance ruling application, not the recipient. Since KESCO was the service supplier and the applicant was merely the service receiver, the application was inadmissible. The authority noted that in a similar matter, the actual supplier had properly filed the application and received a ruling on merits.

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Issues Involved:
1. Whether the services supplied by KESCO by way of utility shifting are integral to the distribution of electricity.
2. Whether these services are ancillary to the principal supply of distribution of electricity.
3. Whether the exemption under Entry 25 of the Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 applies to KESCO.
4. If the exemption applies, whether the applicant is liable to pay GST on utility shifting performed by KESCO or itself.
5. If the exemption does not apply, whether the situation is governed by Section 15(1) or 15(2)(b) of the CGST Act, 2017.
6. Whether the applicant is liable to pay GST on supervision services supplied by KESCO only on the supervision charges or on the total estimated cost of deposit work.

Summary:

Issue 1: Integral Part of Distribution of Electricity
The applicant argued that utility shifting is an integral part of the services supplied by KESCO by way of distribution of electricity, which is exempted under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. They contended that KESCO, as a distribution licensee, has a statutory obligation to maintain an efficient and economical distribution system, which includes utility shifting for safety reasons.

Issue 2: Ancillary to Principal Supply
The applicant claimed that utility shifting is ancillary to the principal supply of distribution of electricity. They argued that maintaining an efficient distribution system inherently involves activities like utility shifting, which ensures uninterrupted supply and public safety.

Issue 3: Exemption under Entry 25
The applicant contended that since the supply of services by way of transmission or distribution of electricity is taxed at nil rate, activities like utility shifting, which form an integral part of such services, should also be taxed at NIL rate.

Issue 4: GST Liability on Utility Shifting
The applicant argued that if the exemption applies, they should not be liable to pay GST on utility shifting performed by KESCO or themselves, as it is an integral part of the exempted service of electricity distribution.

Issue 5: Determination of Transaction Value
If the exemption does not apply, the applicant questioned whether the situation should be governed by Section 15(1) or 15(2)(b) of the CGST Act, 2017. They argued that the cost towards labor and material involved in utility shifting, borne by UPMRC, should not be included in the transaction value for calculating tax payable, as these costs are not incurred by KESCO.

Issue 6: GST on Supervision Services
The applicant contended that they should only be liable to pay GST on the supervision charges (5% of the estimated cost of deposit work) and not on the total estimated cost of deposit work. They argued that the inclusion of the total estimated cost would lead to double taxation.

Authority's Findings:
The Authority for Advance Ruling, Uttar Pradesh, observed that the applicant, being the receiver of the services, does not fall under the definition of "Advance Ruling" as per Section 95 of the CGST Act, 2017. Only the supplier of the services, in this case, KESCO, is eligible to file an application for Advance Ruling. Therefore, the application was not admitted for consideration/ruling on merits.

Ruling:
No ruling was given in the matter as the applicant does not fall under the definition of Advance Ruling. This ruling is valid only within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and subject to the provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.

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