GST Applicability on activities involving ‘Distribution of Electricity’ – AAR, Tamil Nadu*
by ReinHeads Team | Jul 9, 2020
| Facts |
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- Tamil Nadu Generation and Distribution Corporation Limited (‘the Applicant’) is engaged in generation and distribution of electricity in the State of Tamil Nadu whereas Tamil Nadu Transmission Corporation Limited (‘TANTRANSCO’) is engaged in transmission of electricity
- The transactions between the Applicant and TANTRANSCO is as under:
- Receipt of TANTRANSCO’s income in Applicant’s bank account and later adjusted through payable account
- Cost of completed capital asset is transferred by TANTRANSCO to the Applicant and booked as receivable/ payable in respective books
- Meeting fund requirements by the Applicant for TANTRANSCO and booked as receivable
- Supply of materials used in the regular day to day functioning for a consideration
- Deployment of the Applicant’s employees to TANTRANSCO and vice versa, booked as receivable/ payable in respective books
- The Applicant claims that the transactions are in the course of generation, transmission and distribution of electricity and exempted under Notification No. 12/2017-Central Tax(Rate) dated 28 June 2017 (‘the Exemption Notification’)
- Further, the Applicant claims that Deposit Contribution Works (‘DCW‘) i.e., charges like recovery of electricity charges, intervals for billing of electricity charges, restoration of supply etc. are part and parcel of the principal supply and exempted from GST
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| Key Issues before the Authority for Advance Ruling (‘the AAR’) |
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- GST applicability on the transactions between the Applicant and TANTRANSCO and whether the same are exempted under the Exemption Notification?
- Applicability of GST on DCW?
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| Discussion and Findings of the AAR |
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- Applicability of GST on the transactions between the Applicant and TANTRANSCO
- Exemption is meant only for distribution of electricity services by a distribution utility and the intention is not to exempt all the activities. Accordingly, the taxability would be as under:
a) Receipt of TANTRANSCO’s income bank account – Transaction in ‘Money’, not liable to GST
b) Cost of completed capital asset transferred – Supply of business assets and liable to GST
c) Meeting fund requirements – In absence of any consideration, not in the purview of GST
d) Supply of materials – Transaction of supply of goods and liable to GST
e) Deployment of the employees – Transaction of supply of services and liable to GST |
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- Applicability of GST on ‘DCW’
- Work undertaken under DCW is in the nature of installation of transformer lines/ structure/ equipment and other accessories, classifiable under SAC 99873 (maintenance, repair and installation services) and liable to GST
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*Advance Ruling No. 14/AAR/2020 dated 20.04.2020 (Authority for Advance Ruling, Tamil Nadu)
