TaxTMI 
TaxTMI 
2020 (7) TMI 106
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....n Limited, Administrative office at 144, Anna Salai, NPKRR Maaligai, Chennai-600002 (hereinafter called the Applicant or TANGEDCO) is engaged in the generation and distribution of electricity. They are registered under GST vide GSTIN 33AADCT4784E1ZC. They have preferred an application seeking Advance Ruling on the following: 1. GST applicability on the transactions between TANGEDCO Ltd. & TANTRANSCO Ltd 2. Applicability of GST on Deposit Contribution Works 3. Whether TANGEDCO ltd can be considered a "Government Entity" 4. Applicability of GST on Transmission Charges for Natural Gas. The Applicant submitted copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The Applicant is a subsidiary of Tamil Nadu Electricity Board Limited (TNEB Ltd), which is 100% owned by Government of Tamil Nadu. TNEB Ltd is an investment Company only, no other business transactions are being carried out. TANGEDCO is an Electricity Distribution utility under Electricity Act, 2003. As per the provisions under the Section 131 of the Electricity Act, 2003, TNEB was restructured on 1.11.2010 into TNEB Limit....
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.... of TANTRANSCO in respect of circles other than nodal circles is being met out by TANGEDCO's funds and booked as receivable from TANTRANSCO. 2.2.4 Movement of Materials: Similarly any material drawn from TANGEDCO stores by TANTRANSCO and from GCC stores by TANGEDCO is treated as payable and receivable in respective company books. 2.2.5 Movement of employees: For the employees transferred from TANGEDCO to TANTRANSCO and vice versa, their outstanding liabilities are treated as payable and receivable in respective company accounts. The applicant has stated that the transactions are in the course of generation, transmission and distribution of electricity. This activity of transmission, or distribution of electricity by an electricity transmission or distribution utility is exempt under SI.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 with corresponding exemption for SGST. The applicant has sought Advance ruling to confirm that the above said activity is exempt under Sl.No.25 of Notification No.12/ 2017-Central Tax (Rate) 2.3 The applicant has stated that Under the Electricity Act, 2003 (Central Act 36 of 2003) the State Electricity Regulatory Commission sha....
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....(Rate) dated 28.06.2017. Supply of electrical energy is exempt under Sl. No. 104 in Notification No. 2/2017- Central Tax (Rate) dated 28.06.2017. U/s 15, value of supply shall include charges levied under any law for the time being in force, as also incidental expenses and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goads or supply of services. b) Charges in question are prescribed under law in force. ii) The charges are part and parcel of electricity supply under the Electricity Act 2003 a) Under the Code, the charges are actual cost of materials, loading, unloading, and transport and erection charges. Therefore, these are not any service independent of the supply of electrical energy or transmission and distribution of electricity. b) These charges are statutorily included in the value of supply as stated in (1) above. c) Supply of electricity, unlike other goods / services, presupposes erection and creation transmission and distribution equipment and cables. What is "transport" for physical goods, is "transmission and distribution" for electricity or electrical energy. ....
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....city in the state of Tamil Nadu & TANTRANSCO Ltd is in the business of Transmission of Electricity. iii. TANGEDCO Ltd. is a body with 100 per cent participation by way of equity or control, to carry out a function entrusted by the State Government of Tamil Nadu and hence it needs to be recognized as "Government entity" for the purposes of GST provisions, (Acts, Rules and notifications issued there under). As per Notification 11'/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017, their establishment is to be treated as Government Entity. In the light of the facts, status and functions of TANGEDCO, the applicant has requested to confirm if they would be regarded as "Govt. Entity" more specifically for the purposes of Notification No. 11/2017 CTR, Notification No.12/2017 and Notification No.13/2017 as amended by Notifications cited in terms of clause (b) of Sec.97 (2) the CGST Act, 2017. 2.4 Finally, the applicant has requested to clarify the applicability of GST on transmission Charges on Natural Gas. The statement of relevant facts submitted by the applicant is as follows: TANGEDCO has Gas Turbine Stations (GTS)....
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....so stated that after the 101st amendment to the constitution, production and manufacture of natural gas attracts Central Excise Duty and its sale attracts VAT. The applicant also submits that that term "turnover" defined as per Section 2(41) of Tamil Nadu VAT ACT as the aggregate amount for which goods are brought or sold or delivered or supplied or otherwise disposed of in any of the ways referred to in Clause(33) by a dealer either directly or through another..." Explanation II to this sub-section provides that "Subject to such conditions and restrictions, if any, as may be prescribed in this behalf-(i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or before the delivery thereof". Thus, the applicant has submitted that in terms of the above provisions, the transmission of gas by GAIL is part of the amount for which goods are sold. 3.1 The authorized representative of the applicant was heard in the matter on 21.06.2018. They stated that there are various activities between TANGEDCO and TANTRANSCO. The detailed write-up of each of them along with the financial transactions for all sub....
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....f said act, the term "business" includes any activity or transaction undertaken by the Central Government, State Government and a Local authority. Thus, intention of law is very clear unless otherwise exempted, the Government entities will be treated at par with private parties as far the GST compliances are concerned. Many of the services to or by the Government entities have been exempted. For example, the following Notifications refer:- * Notification No. 11/2017-C.T. (Rate) dt.28.6.2017 (as amended) * Notification No. 12/2017-C.T. (Rate) dt.28.6.2017 (as amended) Since the exemptions are to be strictly construed, ARA is requested to confirm if TANGEDCO would be regarded as "Govt. Entity" for the purposes of exemptions under the two notifications cited. IV. Applicability of GST on Transmission Charges for Natural Gas As far as the above question is concerned, since the natural gas is outside the purview of GST and only Central Excise duty/ VAT are applicable for its manufacture/Sale, the question as to whether (i) that transmission charges, merely because it is claimed separately by GAIL, would not be chargeable to GST as supply of service, and (ii) would the transmiss....
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....ourt order. They submitted balance sheet and financial statements where they indicate the transfer of assets, materials purchased under 'receivables' and 'payables' and they informed that when any amounts are received the same is offset in receivables. The applicant undertook to submit the detailed breakup in 1 week. In respect of DCW, they undertook to submit a complete transaction, works contract and invoice raised on the customer in 1 week. 5.2 The Applicant filed Additional written submission with the details as undertook by them during the personal hearing held on 25.02.2019. The applicant furnished documents for DCW from the initiation of DCW till its completion by TANGEDCO on behalf of the consumers. The Applicant had elaborated the transactions between TANGEDCO and TANTRANSCO synopsis of the same is as follows: TRANSACTIONS BETWEEN TANGEDCO AND TANTRANSCO TANGEDCO and TANTRANSCO are two subsidiary companies of the Holding Company, TNEB Limited. In view of the query on the applicability of GST on the various transactions between the TANGEDCO and TANTRANSCO, as requested in the hearing dt.25.02.2019, the nature of transactions, quantum of value such transactions for, the F....
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....cation Advance which are all pending to be recovered in subsequent salary, such advances would be transferred to the respective companies, where the employees will join on transfer / promotion. Similarly, the General Provident Fund and Contributory Pension Scheme Fund balances of those transferred employees would also be transferred to the respective company books of accounts. All such transfers are accounted based on only actual values. 38.88 11.17 5. Even though TANGEDCO and TANTRANSCO are subsidiary companies, the long term open access transmission charges has to be paid to TANTRANSCO by TANGEDCO every month. This transmission charges is fixed by Hon'ble TNERC based on the Electricity Act Regulations. As there is financial difficulty in TANGEDCO the prescribed claim of Transmission charges are not actually remitted by TANGEDCO to TANTRANSCO and booked as payable in books of accounts. In the regular fund flow management both the companies are swapping their available funds on day to day basis. 1621.15 6. Similarly, TANGEDCO collects Scheduling and system operating charges, LTOA Transmission charges by CPP, LTOA transmission available by wind generation, Normal sche....
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....nd Distribution' are by themselves two different activities and the utilities are registered independently. The reading of the exemption notification also is very clear and is applicable only to the 'Distribution of electricity'. The Constitution bench of Honble Supreme Court in the case of Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company (2018 (361) E.L.T. 577 (S.C.)] = 2018 (7) TMI 1826 - SUPREME COURT, while answering the question, 'what is the interpretative rule to be applied while interpreting a tax exemption provision/notification when there is an ambiguity as to its applicability with reference to the entitlement of the assesse or the rate of tax to be applied?' Has held that 52. To sum up, we answer the reference holding as under - (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assesse and it must be interpreted in favour ....
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....udes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II; Section 2(17) of the Act defines 'Business' as under (relevant portion extracted): (17) 'business" includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; Section 2(31) of the Act defines Consideration as (31) "consideration" in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of in response to, or for the inducement of the....
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....ds forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person; In the case at hand, the assets transferred by the applicant to TANTRANSCO are business assets as no longer to form a part of their assets. Therefore, the said Transfer of assets' is a 'Supply of Goods' and GST is applicable on the said supply 7.3.3 Transactions of physical fund flow: It is stated that since both the subsidiary companies are operating with huge cash loss, there are transactions of physical fund flow between the companies by the way of repayment of existing loan, availment of fresh loans, etc... to manage the financial difficulty, on actual basis without any interest component on such fund flow. From the descriptions, it is seen that the same is transaction in money without any consideration. Section 2(52) and 2(102) of the Act defines 'Goods' and 'Services' as under: (52) "goods" means every kind of movable property other than money and securities but includes actionable claim, gr....
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....and receipt of TANTRANSCO's income in the applicant's bank A/c, being mere transaction in 'Money', GST is not applicable to such activities * Movement of Employees of the applicant to TANTRANSCO being supply of manpower is a supply of service and GST is applicable on this activity. 8.1 The applicant has sought to clarify whether the above transactions being in the course of generation, transmission and distribution of electricity by an electricity transmission or distribution utility is exempt under Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. The relevant statutory provisions are extracted as follows: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 25 Heading 9969 Transmission or distribution of electricity by an electricity transmission or distribution utility. NIL NIL 'Electricity transmission or distribution utility is defined in Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 as under: z) "electricity transmission or distribution utility" means the Central Electricity Authority; a State Electricity Board: the Central Transmission Utility or a State Transmission Util....
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....ise to Physical fund flow and receipt of TANTRANSCO's income in the applicant's bank A/c 8.2.4 Movement of employees as discussed in Para 7.3.4 supra, is a supply of 'Manpower Service' and not a service involving mere distribution of electricity. The exemption at Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, exempts only the services involving distribution of electricity and therefore the consideration received relating to deployment of services of employees to TRANTRANSCO are not exempted under Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 and are hence taxable. 8.2.5 Activity of payment of expenses incurred by TANTRANSCO relating to vehicle hire charges, maintenance of sub-stations, salary payments, etc and paid by TANGEDCO & accounted as receivable in the books of the applicant as discussed in Para 7.3.5 supra. The said activity is not one involving services of distribution of electricity and therefore the exemption under Sl. No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 is not available for the stated transactions. 8.2.6 Activity at Sl.No. 5 of Para 5.2 relates to receipt of Services from TANTRANSCO for which the p....
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....ff) Description of Services Rate (per cent.) Condition 25 Heading 9987 Maintenance, repair and installation (except construction) services. 9 - 9.3 Further, we find that CBIC Vide Circular No. 34/8/2018-GST dated 01/03/2018 issued in file F. No 354/ 17/2018-TRU, has issued clarifications as approved by the Fitment Committee to the GST council in its meeting held on 9th, 10th and 13th January 2018, wherein under Sl.No.4 the issue at hand stands clarified as under: SI.No. Issue Clarification 4 1) Whether the activities carried by DISCOMS against - recovery of charges from consumers under State Electricity Act are exempt from GST? (1) Service by way of transmission or distribution of electricity by an electricity transmission or distribution utility is exempt from GST under notification No. 12/2017- CT (R), Sl. No. 25. The other services such as, - i. Application fee for releasing connection of electricity; ii. Rental Charges against metering equipment; iii. Testing fee for meters/ transformers, capacitors etc.; iv. Labour charges from customers for shifting of meters or shifting of service lines; v. charges for duplicate bill; provided by DISCOMS to consum....
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.... No. 31/2017-Central Tax (Rate) dated 13.10.2017 and Notification No. 32/2017-C.T.(Rate) dated 13.10.2017 effective from 13.10.2017. 11. Finally, the applicant has sought ruling regarding applicability of GST on transmission charges for Natural Gas supplied by GAIL. From the submissions, it is seen that the applicant receives Natural gas from GAIL, who charges GST on the transmission Charges apart from VAT on sale of 'Natural Gas'. It is clear that the applicant do not make any of the supplies in question, but are in fact the recipient of the supplies as stated in their application. Thus, the question is on the liability to pay tax on the services supplied to them and not on the supply made by them. Section 95 (a) of CGST and TNGST Act defines 'advance ruling' as (a) "advance ruling" means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;; From the above, it is evident that an applicant can seek an Advance Ruling in relation to ....