Service tax / Sales tax on sale of Electricity

[RAM SHARMA]

Dear Expert,

We are registered Manufacturer and Service Receiver. We have purchased electricity more then consumption. Can we sale excess electrity to another company. If yes then what will be the service tax and sales tax liability.

Thanks

[CASeetharaman KC]

Transmission or Distribution of Electricity is covered under the negative list, hence no service tax is payable

[YAGAY andSUN]

Since in VAT Laws, electricity is considered as goods, therefore, on the mark-up, there may be liability of VAT.

[RAM SHARMA]

Can any Manufacturing company purchase electricity and sale surplus electricity. I have doubt about it.

[YAGAY andSUN]

Yes sir, Electricity Act, 2003 has provisions in this regard.

[JAMES PG]

It appears that there are restrictions on sale of electricty by one company to another company

[CASeetharaman KC]

There are specific provisions in the Electricity Act and also where power can be purchased from any distributor by another distributor of electricity . Presently the SEB's are the large distributors where again their operations have been sgregated into Generation, Transmission and Dirstribution with different sections sometimes companies taking care of different divisions. Also there are cases where other smaller distributors like for example, SEZ's Port Trusts, Tecnology parks are also given licences for distribution. Most of these small distributors purchase power from larger distributors viz SEB's or Reliance Power or Tata Power through the Grid for which wheeling charges are charged for transportation of electricity. All these formalities are regulated by the Electricity Regulatory Commission of the respective state and therefore this is the Authority which needs to be approached for the licences. 

[Guest]

Dear Sir,

As per my knowledge one of the High Court has confirmed levy of Sales Tax on sale of Electricity valid.

AI Summary

Electricity Sale to Another Company: Exempt from Service Tax, But VAT May Apply on Markup Under VAT Laws A manufacturer and service receiver inquires about the tax implications of selling excess electricity to another company. Responses indicate that the transmission or distribution of electricity is exempt from service tax due to its inclusion in the negative list. However, electricity is considered goods under VAT laws, potentially incurring VAT liability on the markup. The Electricity Act, 2003 allows for such transactions, but there may be restrictions. Smaller distributors often purchase power from larger ones, with regulations overseen by the state's Electricity Regulatory Commission. A High Court has upheld the validity of sales tax on electricity sales.