TaxTMI 
TaxTMI 
2020 (7) TMI 106
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....neration and Distribution Corporation 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 Elect....
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....erred from TANGEDCO Bank A/c and booked as receivable from TANTRANSCO in TANGEDCO'S Books, The funds requirement 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 (Rat....
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....mission or distribution of electricity by an electricity transmission or distribution utility" is exempt under SI. No. of notification No. 12/2017- Central Tax (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, pres....
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....EB limited; Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO); and Tamil Nadu Transmission Corporation Limited (TANTRANSCO). TANGEDCO is in the service of Generating and Distributing (sale of) Electricity 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....
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....o or more taxable supplies of goods or services or both" and the applicant is of the view that supply of natural gas and supply of a service of its transmission do not amount to "composite Supply" as per the definition. The applicant has also 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 author....
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..... III. Whether TANGEDCO can be considered a "Government Entity" Section 2(88) of the CGST Act, 2017, defines the term "person" in such a way that it includes also the Central Government, State Government and a Local authority within its ambit. Further, as per Section 2(17) of 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 i....
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.... was offered an opportunity to be heard again on 25.02.2019 due to change in the SGST Member of the Authority and was heard. The applicant submitted a written submission and stated that in several case laws submitted, the transmission and distribution of electricity is exempt under GST and Circular 34/2018 was stuck down in recent High Court 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 TAN....
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....oyees are similar and transactions between these companies are also common. Based on utilization of manpower in the respective company, the actual expenses on salary and its related allowance are also booked. While transfer of employees from one company to another company the advances to staff i.e., House Building Advance, Computer Advance, Vehicle Advance, Festival Advance, Education 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....
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....ty and should not be vivisected and taxed to defeat the exemption.; Electrical energy is exempted from GST as "Supply of goods" as well.; Therefore, any GST levy by vivisection of the comprehensive set of activities contributing to the achievement of 'transmission and distribution of electricity' in terms of the provisions of the Electricity Act 2003 would defeat the exemption. We do not find merit in this argument. 'Transmission and 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....
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....ade by TANTRANSCO to TANGEDCO and shown as receivables from TANTRANSCO are not in the purview of this authority and are not taken up for consideration. 7.2 To answer the question raised, first, the type of supply and whether the supply is a taxable supply under GST is examined and then the applicability of the exemption entry is taken up for decision. Supply is defined under Section 7 of the COST Act 2017 and the same is reproduced below for reference: 7. (1) for the purposes of this Act, the expression 'supply" includes- (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 re....
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....h of the said goods as per the classification and rate determined in Notification No. 01/2017-C.T. (Rate) dated 28.06.2017. 7.3.2 Construction of sub-station Buildings, erection of transformers and transfer of 'Capital Assets' It is stated that at the time of segregation of circles assets relating to TANTRANSCO will be transferred to TANTRANSCO. It is seen that Schedule II to the Act, specifies the activities which are to be treated as supply of goods or services and SI.No. 4 of the schedule deals with the 'Transfer of Business Assets', the related entry is as follows: 4. Transfer of business assets (a) where goods 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....
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....es'. Therefore GST is not applicable. 7.3.6 Activity at Sl.No. 5 of Para 5.2 relates to receipt of Services from TANTRANSCO for which the payment is to be made by the applicant. Since the applicant is not the person supplying, this part do not fall within the purview of the Advance Ruling as per Section 95(a) of the COST Act 2017 and hence not answered. 7.4 To summarize the above, • The supply of materials for day to day operations is 'supply of Goods' and GST is applicable on such supply at such rates applicable to such goods. • Transfer of Assets is Supply of Goods and GST is applicable on such supply at the applicable rates • Transaction of Physical fund 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 distr....
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....he exemption stipulated at Sl.No. 25 of Notification No. 12/2017-C.T (Rate) dated 28.06.2017 as amended and are hence taxable. 8.2.2 As brought out in para 7.3.2 supra, the 'Transfer of business Asset' is a 'Supply of Goods' and as the entry at Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, exempts only the services involving distribution of electricity, this supply of goods are not covered under the exemption stipulated at Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 as amended and are hence taxable. 8.2.3 It is held that GST is not applicable on the 'Physical fund flow' as discussed in Para 7.3.3 supra which is a transaction in 'money' as it is neither 'Goods' nor 'services' and therefore the applicability of exemption Notification do not arise 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....
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....ments classifiable under SAC 99873. For ease of reference, the said heading is given as under: 9987 Maintenance, repair and installation (except construction) services ............................................................................................................. 99873 Installation services (other than construction) This group includes physical placement, configuration, set-up, calibration and testing of proper operation of various types of machinery and equipment And the applicable rate of tax is as specified under Sl.No. 25 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and SI.No. 25 of Notification No. II (2)/CTR/ 532 (d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended, which is extracted below: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) 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....
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....ate Government, Union Territory or a local authority. From the submissions, it is seen that TANGEDCO Ltd is established by Government of Tamil Nadu vide G.O. Ms. No. 94 Energy (B2) Department dated 16.11.2009 with the primary object to function as generation and distribution utility in terms of the provisions of Electricity Act 2003. It is a public company wherein 99 percent shares are held by TNEB, the Holding Company, which is established by Government of Tamil Nadu with more than 90 percent equity shares and control. The appointments of the directors to TANGEDCO are by the Government. Thus TANGEDCO is a Public Limited Company established by Government of Tamil Nadu with more than 90 percent control for the purposes of generation and distribution of electricity. Hence, TANGEDCO Ltd is a government Entity for the purposes of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017 and 12/2017-C.T.(Rate) as amended vide Notification 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 ....