SAC Code for Electricity Supply

[Ethirajan Parthasarathy]

As per Kolkata High Court decision in the case of Srijan Realty (P) Ltd., =  2019 (3) TMI 821 - CALCUTTA HIGH COURT the landlord is liable to pay service tax on electricity charges collected from tenants based on sub-meters installed. I presume this decision is hold good under GST also. If yes, what is SAC to be mentioned. I understand the Supreme Court has given finding that the electricity can be classified as a goods. Does it mean we should quote HSN not SAC.

[KASTURI SETHI]

The decision cited by you does not hold good under GST. Electricity is a goods. There are two aspects : one is manufacture (generation) of electricity and other is supply (transmission and distribution) of electricity. SAC (Service Accounting Code) was relevant in Service Tax period. It is not relevant now. Even the word HSN is not legally correct. Correct way is Chapter/Heading Sub-heading Tariff Code : in your example it is 998631 (Support services to electricity transmission and distribution services).

In my view, this issue is fit for filing an application with the jurisdictional Advance Ruling Authority.

[Ganeshan Kalyani]

Advance Ruling is an optional and better way to seek clarity on an issue. However it you have to think before you leep. Because advance ruling an mandate to you. That is you have to follow that order. You cannot take any other stand.

[KASTURI SETHI]

Break-up of supply of electricity: 998631

99 : Denotes Chapter No.

86 :Denotes Heading No.

31 : Denotes Sub-heading No.

These are to be mentioned on invoices as prescribed. In service mostly 4 digits are used which indicate Chapter and Heading.

Chapters No. from 1 to 98 A of GST Tariff are meant for all goods.. Chapter No. 99 is meant for all services

[KASTURI SETHI]

On 5 or 6 .4.2019 AAR-Maharashtra has held that GST is applicable on electricity and water charges collected on actual basis from tenant along with rent. Applicant E-Square Leisure (P) Ltd.

[KASTURI SETHI]

I am of the view that this decision of AAR Maharashtra most likely will be reversed by the AAAR or Central Advance Ruling Authority. Such electricity and water charges cannot fall in the definition of 'consideration'.

AI Summary

Classification of electricity as goods alters GST invoicing and may make landlord utility charges taxable under tariff rules. Electricity is classified as goods under GST and SAC from the service tax regime is not relevant; invoicing must use GST tariff Chapter/Heading/Sub heading codes (example: 998631 for support services to electricity transmission and distribution). Advance Rulings can be sought for clarity but are binding on the applicant. A recent AAR applied GST to electricity and water charges collected with rent, though that decision may be contested and issues remain whether such charges amount to consideration.