WHEELING CAHRGES AND GST LIABILITY

[Sadanand Bulbule]

Dear experts

Entry No. 25 of Notification No.12/2017-CTR dated 28/06/2017 provides tax exemption on the following services:

25

Heading 9969

Transmission or distribution of electricity by an electricity transmission or distribution utility.

 Electricity transmission and distribution utilities are defined under the Electricity Act, 2003. Under open access scheme, wheeiing of electricity means to use the transmission and distribution network by a third party, usually a generator of power, to deliver it to a consumer. Transmission /distribution licensees allow others to wheel power throuhg the network and for such usage, charges are recovered by the dstribution utilities. As such it is not in the nature of transmission and distribution of electricity by the notified utiliities. Admittedly such wheeling cahrges are not included in the above entry for tax exemption.

However some AARs have held that, wheeling charges are also on par with the transmission and distribution of electricity covered by the above entry and therefore exempt from tax.

In my understanding, admittedly wheeling charges are for allowing third parties to make use of network infrastructure. So they are not covered under Entry No 25 of Notification No. 12/2017-CTR dated 28/06/2017. Meaning wheeling charges attract tax at 18% since such charges being under contractual obligation with third parties are not part of distribution of electricity the utilities.

Experts to open moonlight.

AI Summary

Wheeling charges may be exempt when part of regulated transmission or distribution as a composite supply; unregulated charges likely taxable.
Wheeling charges levied to permit third-party use of licensed transmission/distribution network may be exempt under Entry No.25 when levied by a notified utility, incorporated in a regulator-approved tariff, and forming part of the composite supply of transmission/distribution; charges that are contractual, unregulated, or levied by private parties are likely taxable.