sale of electricity

[KARAN VERMA]

Sir

I m generating electricity through solar power plant, 50% is used by me and remaining 50% sold to tenant

whether gst applicable on sale of power to tenant.

[KASTURI SETHI]

(1) Electricity is a goods falling under Chapter/Heading/Sub-heading No. 2716 00 00 of Customs Tariff Act. A supply of electricity is exempted vide Notification No.2/17-CT(R) dated 28.6.17 as amended (serial no.104). It is relevant to mention here that as per Section 2(23) of Electricity Act, 2003, the words, 'electricity' and 'electrical energy' convey the same meaning and message.

(2) Transmission or distribution of electricity by an electricity transmission or distribution utility is exempt vide Notification No.Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 as amended at serial no.25 classified under SAC 9969.

(3) Transmission or distribution of electricity (SAC 9969) by other than electricity transmission or distribution utility is taxable vide Notification No.11/17-CT(Rate) dated 28.6.17 as amended (at serial no.13 ) GST@ 18% ( CGST 9% & SGST 9%).

Your activity falls at serial no.3 above. Hence GST is applicable for supply of electrical energy to tenant. No exemption is available to you, being non-transmission or distribution utility.

[KARAN VERMA]

Thank you sir.

I have one more view, generation and distribution of electricity are two different things. Generation of electricity is supply of goods and transmission/distribution is supply of service.

My intention is to sale electricity to tenant and this is covered under 0% rate, further electricity is not sold without transmission, then it becomes composite supply.

When principal supply i.e sale of electricity is nil rated , then ancillary supply which is transmission of electricity also becomes exempt due to composite supply and gst rate of principal supply will attract.

Whether i m correct.

[KASTURI SETHI]

In this scenario, Renting of Immovable Property is a principal supply and transmission or distribution of electrical energy is an ancillary supply.

If you do not agree, you must apply to Advance Ruling Authority. It will be safer.

[Balaji S]

Sir,

What you are selling is a Commodity classified under HSN 2907, Wheeling and Transmission is a service incurred by you to deliver the product to the end user or recipient. The primary objective here is to sell electricity. You view considering Transmission as composite supply is correct. Electricity should still be considered exempt supply.

AI Summary

Electricity supply exemption: sale to tenant by non-utility is taxable unless treated as ancillary to renting, seek ruling.
Electricity is generally an exempt commodity, but transmission or distribution performed by entities other than designated utilities is taxable; therefore, supply of electrical energy by a generator to a tenant is likely taxable for the transmission/distribution component unless the transaction is held to be a composite supply with an exempt principal supply-an advance ruling is recommended where classification is disputed.