Electricity sale in inter unit

[RAM SHARMA]

Dear Experts, What is the legal obligation if we sale electricity to our inter unit or sister concer. Can we do it. Please advice excise and service tax point of view or any other legal obligation.Thanks

[PAWAN KUMAR]

As per my view, since electricity neither goods nor specified as service, therefore for the purpose of sale to interunit, no leviability under excise and service tax.

[Madhukar N Hiregange]

Electricity is goods under CE at nil rate and since it is goods there is no ST. VAT is exempted in most states.

[Rajesh Nathoo]

Dear Ram Sharma,

  Check out the issue from Cenvat point . If u are taking Cenvat Credit on inputs , input services , capital goods in relation to generation of this electricity , Cenvat Credit will have to be reversed proportionally .

[Mahir S]

Assessee are entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). However, they are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price.

[RAM SHARMA]

Thanks to All.

AI Summary

Cenvat credit: reversal required where electricity generated is cleared for sale rather than used for captive consumption. Electricity is treated as goods (nil-rate) and not as a service, so service tax does not apply and VAT is often exempt. Where Cenvat credit has been availed on inputs, input services or capital goods used in generation, proportionate reversal of credit is required for electricity cleared for sale; credit is only available to the extent of captive consumption and not for excess electricity sold at contractual rates.