GST on Power Backup Charges at Residential Society

[ROHIT GOEL]

Dear experts

ABC Builders has developed a built up residential society. In order to ensure regular supply of electricity to the residents, Builder has installed GENSETS via which power backup is provided. Sub meters have been installed at each house and at month end Rs. 20/unit is being recovered on each unit of electricity consumed by the residents.

As per NN 02/2017-CT(Rate), Electrical energy being a good is exempt from GST. However, certain AARs have ruled that in this case, builder is providing facility management service and not electricity supply and therefore GST is applicable at 18%.

I hereby seek your valuable opinion on this issue.

[Amit Agrawal]

In my view, GST is not payable in given fact & circumstances by the Builder against 'supply of electricity'.

Of-course, builder needs to charge GST against 'Facility Management Services'. But, charges for electricity cannot be included in his facility management cost for purpose of charging & paying GST.

However, if objected by Dept., one needs to have proper documents / evidences to demonstrates that this supply of elecricity is not part of any 'composiite supply' (where facility management being treated as 'principal supply'). As there is no straight jacket formula to achieve such defence/s and one needs to look into facts / circustances surrounding each case holistically as well as industry practises to arrive at such defences.

Above are strictly my personal views and same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Taxable under Notification No.11/17-CT(R) dated 28.6.17 as amended. (Serial no.25 refers ). In this scenario, no exemption is available under notification no.12/17-CT(R) dated 28.6.17 (serial no.25 refers ), being not covered at serial no.25 of Notification 12/17-CT(R). Under this notification exemption for transmission or distribution is admissible to an electricity transmission or distribution utility. The builder is not a utility for transmission or distribution

AI Summary

GST on electricity supply: characterization as electricity or facility management service determines taxability. Characterization of builder collected power backup charges determines GST: electrical energy is generally exempt, but charges may be taxable if treated as facility management service or as a composite supply where the builder is not a transmission/distribution utility; documentary evidence and facts are necessary to sustain a non taxable characterization.