Electricity supplier wins input tax credit refund as time of supply under Section 12(2) CGST Act determined by invoice date not actual supply period

The AP HC ruled in favor of the petitioner regarding refund of input tax credits for electricity supply. The court held that under Section 12(2) of CGST Act, time of supply for continuous goods supply is determined by whichever is earlier between invoice preparation date or payment date, not the actual supply period. Since the petitioner was contractually required to raise electricity bills by the 7th of the succeeding month, the time of supply legally occurred when the bill was presented in the following month, despite electricity being supplied in the previous month. The court allowed the writ petitions, setting aside both original and appellate orders.

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Issues:
Refund of input tax credits under the Integrated Goods and Services Tax Act, 2017 based on export sale; Interpretation of Rule 89 of the Central Goods and Services Tax Rules, 2017 regarding proof of export; Applicability of the amendment to Rule 89 in a retrospective or prospective manner; Determination of the relevant period for considering refund applications in the context of continuous supply of goods; Disagreement between the petitioner and the tax authorities on the interpretation of relevant provisions.

Analysis:
The petitioner, a power generator, sought a refund of input tax credits for supplying electricity to M/s. Bangladesh Power Development Board, claiming it as an export sale exempt from tax under the IGST Act. The tax authorities rejected the refund applications due to the absence of bill of shipping. The petitioner argued that electricity being intangible, the bill of shipping requirement was inapplicable. A previous judgment deemed an amendment to Rule 89 of the CGST Rules as retrospective, allowing proof of export through the Regional Energy Account (REA) maintained by the Regional Load Dispatch Center. The tax authorities insisted on the REA for the specific month of refund application, leading to rejection of the petitioner's claims.

The dispute centered on the interpretation of Rule 89 and the relevant period for refund consideration. The petitioner contended that the REA of the previous month should suffice, as invoices for electricity supply were issued in the succeeding month. The tax authorities, however, maintained that only the REA for the refund month was relevant. The court analyzed the CGST Act provisions on continuous supply of goods and time of supply, emphasizing the importance of invoice issuance for determining tax liability.

The court concluded that the time of supply for continuous goods should align with invoice issuance, not the supply period. As per the power purchase agreement, invoices for electricity supply were raised in the succeeding month, making the REA of the previous month pertinent for refund applications. Consequently, the court allowed the writ petitions, directing the tax authorities to consider refund applications with the previous month's REA as proof of export. The orders in appeal and original were set aside, with no costs imposed.

In summary, the judgment resolved the dispute by interpreting relevant provisions of the CGST Act and Rules, emphasizing the significance of invoice issuance for determining the time of supply in continuous goods transactions. The decision favored the petitioner's argument, allowing the use of the previous month's REA for refund applications, thereby granting relief in the form of refund consideration based on the revised interpretation.

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