2026 (3) TMI 499 - HC - GST

Consideration as inducement: regulatory fees for tariff and licence functions are not taxable supplies and fall outside GST coverage.

Fees levied by a State Electricity Regulatory Commission for tariff petitions and licence functions under Section 86 of the Electricity Act do not qualify ... Regulatory functions - fees received by a State Electricity Regulatory Commission (tariff petition fee and licence fee) for discharging functions under Section 86 of the Electricity Act, 2003 - Supply in the course or furtherance of business - fees received for statutory, quasi judicial functions - supply of services - Scope and interaction of the statutory definitions of 'business' and 'consideration'. Regulatory functions of a commission - Whether the show cause notice levying GST on tariff petition fee and licence fee received by the petitioner for discharging functions under Section 86 of the Electricity Act, 2003 is sustainable - HELD THAT:- The Court adopted the reasoning of the Delhi High Court in Central Electricity Regulatory Commission Versus The Additional Director Directorate General of GST Intelligence (DGGI) and another [2025 (1) TMI 887 - DELHI HIGH COURT] which examined the definitions of 'business' and 'consideration' under the CGST framework and held that regulatory functions vested in a Commission cannot be equated with activities listed in Section 2(17) as trade, commerce, profession or similar activities. The definition of 'consideration' must be read with supply being in the course or furtherance of business under Section 7; fees received by a Commission for exercising statutory, quasi judicial and regulatory powers are not payments made as inducement for supply of goods or services. Schedule III expressly excludes services rendered by a court or tribunal, and the Electricity Act does not separate regulatory from adjudicatory functions of a Commission; those functions are statutory and tribunal like in character. Applying these principles, the Court found the assumption of jurisdiction in the impugned show cause notice to be arbitrary and unsustainable. The Court also noted that the Delhi High Court decision relied upon was the subject of an SLP which was dismissed by the Supreme Court and that no stay has been granted in the review proceedings, reinforcing the applicability of that precedent to the present petition. [Paras 7, 9, 11] The show cause notice levying GST on the tariff petition fee and licence fee was set aside as impermissible; the notice is quashed. Final Conclusion: The writ petition is allowed and Show Cause Notice No. 160/2024 is quashed on the ground that fees collected for discharge of statutory, quasi judicial and regulatory functions of the Commission do not constitute taxable supply in the course or furtherance of business under the GST law. Issues: (i) Whether fees received by a State Electricity Regulatory Commission (tariff petition fee and licence fee) for discharging functions under Section 86 of the Electricity Act, 2003 constitute a supply of goods or services in the course or furtherance of business and are liable to Goods and Services Tax under the Central Goods and Services Tax Act.Analysis: The dispute turns on the scope and interaction of the statutory definitions of 'business' and 'consideration', the requirement in Section 7 that a taxable supply be in the course or furtherance of business, and the exclusions in Schedule III of the Central Goods and Services Tax Act. Applying the statutory framework, the definitions of 'business' and its sub-clauses are directed at trade, commerce, professions and analogous activities and do not encompass the regulatory powers vested in a Commission constituted under the Electricity Act, 2003. The concept of 'consideration' must be read in the context of an inducement to supply goods or services, which is not satisfied by fees levied as part of statutory regulatory or adjudicatory functions. Schedule III explicitly excludes services rendered by a court or tribunal; the regulatory and adjudicatory functions of a Commission are indivisible and operate in a quasi-judicial statutory sphere rather than as commercial supplies. Prior authoritative reasoning establishing that tariff regulation, licensing and inter-state transmission regulation are extensions of statutory obligation and not commercial activities applies to the present facts and leads to the same legal characterisation.Conclusion: The fees received by the Commission for tariff petitions and licence-related functions under Section 86 of the Electricity Act, 2003 are not supplies in the course or furtherance of business for the purposes of the Central Goods and Services Tax Act and therefore are not liable to GST; relief granted to the petitioner.