Taxability of Leasing and Electricity Supplies – AAR Haryana
by ReinHeads Team | Mar 4, 2020
| Facts |
- Keysight Technologies International India Pvt Ltd (‘the Applicant’) has entered into an agreement with Agilent Technologies Private Limited (‘the Landlord’) for taking a part of premises on lease which will be used by related parties of the Applicant
- The Landlord provide other services such as utilities at common area, facility management etc.
- The Landlord also supply electricity (through grid supply and captive DG set) to the Applicant and raises invoice basis the unit consumed
- The Landlord charges GST @18% on the supply of renting services and electricity
|
| Issue before the Authority on Advance Ruling (‘AAR’) |
- Whether the supply of electricity is a supply of goods or services?
- Whether the supply of electricity and supply of utilities/leasing are separate supplies or composite supplies?
- If supply of electricity and supply of utilities/ leasing are separate supplies, what is the classification of supply of electricity for the purpose of payment of GST?
- Whether the Applicant is eligible to take credit of Input Tax Credit (‘ITC’) on such supply of renting services and electricity, if any?
|
| Discussion and Ruling of the AAR |
- The GST Act defines goods as every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply
- As per the Entry No. 104 of Notification 02/2017 – Central Tax (Rate) dated 28 June 2017 (Tariff HSN 27 16 00 00), electrical energy is goods and not a service
- The power backup provided to the Applicant through DG set (belonging to the Landlord) is a service as the charges are determined by the Landlord as per his convenience
- Supply of electricity and supply of leasing/ utilities are separate supplies & does not qualifies as composite supply since:
- Supply of electricity to the extent of being supplied through grid is exempt and therefore, the condition of two or more taxable supplies is not satisfied
- Both the supplies are neither naturally bundled together nor supplied in conjunction with each other
- Neither of the supplies can be termed as a principal supply nor other one being a natural ancillary
- In light of the above, it was ruled that-
- Supply of electricity to the extent it is supplied through grid is supply of goods and is exempt from GST
- Supply of electricity to the extent it is supplied through DG set is supply of services and liable to GST
- Supply of electricity through grid and supply of utilities are separate supplies
- The supply of electricity energy is classified under Entry No. 104 of Notification No. 2/2017-Central Tax (rate), dated 28 June 2017 (Tariff HSN 27 16 00 00)
- The Applicant is eligible to take ITC on supply of renting services. ITC in case of electricity supply shall be restricted to the supply made through DG sets.
|
