GST on sale of units generated from solar plant

[Shreyansh Mehta]

i had given a work contract service of installling solar plant and claimed ITC on it and now i am selling the units generated from solar plant to the goverment of gujarat. so is gst is applicable on revenue generated from sale of units ?? and if i am selling the units to other person other than government am i liable to pay GST and if it is applicable can i availed ITC of work contract service against the liability.

[KALLESHAMURTHY MURTHY K.N.]

I have read the opinions of the learned seniors in this forum. They have rightly expressed their views by referring to the relevant Notifications. The supply of electricity to the government or otherwise is exempted from GST. Where there is no output tax liability, there is no eligibility for ITC. The refund of ITC does not arise.

[Shailesh Bapat]

Dear Experts,

Notification No. 2/2017 - CT (R) dated 28th June 2017 states that 'Electrical Energy' is nil rated.

Notification No. 11/2017 _CT(R) dated 28th June 2017 states that 'Electricity distribution service' is taxable.

The GST Law operates on concept of supply. Then which kind of supply is covered under Notification No 2/2017 and by whom?

[KALLESHAMURTHY MURTHY K.N.]

Notification 2/2017 enumerates "Electricity Energy" (HSN Code: 27160000), as exempt from GST so also NNo. 12/2017 in entry No. 25 for Heading 9969 notifies tax rate nil for "Transmission or distribution of electricity by an electricity transmission or distribution utility". HSN Code 996911 is for "ELECTRICITY TRANSMISSION SERVICES" and 996912 is for "ELECTRICITY DISTRIBUTION SERVICES".

CBIC issued Circular No. 34/8/2018-GST which stated that any ancillary service provided by the above utility will be taxable under GST. These services include:

• Application fee for releasing connection of electricity
• Rental charges against metering equipment
• Testing fee for meters/transformers, capacitors etc
• Labour charges from customers for shifting of meters or service lines.
• Charges for duplicate bills.

The above supplies except for rental charges are on demand by the consumer and not naturally bundled with services. The Departmental taxing authorities can take these views to charge with GST.

It is clear that the transmission or distribution of electricity by an electricity transmission or distribution utility is exempted from the levy of GST from the two notifications. The Circular mentions other issues as liable to tax. The notification has a higher value than the Circular instruction which meant guidance to the Departmental Authorities not binding on the taxpayers. As learned Kasturi Sethi Sir, mentions the struck down of said circular by the hon'ble HIGH COURT OF GUJARAT, it is left to the decision of CBIC to take the further implementation of the Judgement.

However, the supply of electricity is exempt and not regarded with the availment of ITC in any way. ITC availment for the supply of services as per Circular is regulated u/s 16(2) of the CGST Act.

Disclaimer: I am not a professional. The contents are my personal opinion not to take as professional guidance.

AI Summary

Exemption for supply of electrical energy means sale of solar-generated units is generally GST-exempt and ITC is unavailable.
Supply of electrical energy is generally exempt under Notification No. 2/2017, and transmission/distribution by a notified electricity utility is exempt under Notification No. 12/2017. If supply or transmission/distribution is performed by an entity not qualifying as the notified utility, GST may be attracted. Outward exemption ordinarily precludes claiming ITC on inputs used to effect that supply under the relevant rules, and refund of accumulated ITC is not generally available except in statutorily specified situations; litigation and circulars on ancillary charges affect characterisation but do not alter the primacy of the notifications.