2018 (11) TMI 1758 - AAR - GST

Classification of goods - applicability of GST rate - services rendered while supply/ distribution of electric energy - HELD THAT - It is an undisputed fact that the party is engaged in transmission or distribution of electricity and the same shall be treated as supply of service. The applicant claimed that said supply of service is exempted from GST in terms of Notification No. 12/2017-Central Tax (Rate), dated 28th June, 2017 - the intra-State transmission or distribution of electricity by an electric transmission or distribution utility is covered under Service Code 9969 and attracts GST @ nil on the same. In the instant case transmission or distribution of electricity and service rendered during the course of said service is covered under composite service and transmission or distribution of electricity constitutes the predominant element and therefore becomes the principal supply and other services as mentioned in Annexures A B of the application shall form the part of that composite supply as ancillary inasmuch as distribution of electricity, energy cannot be effectively accomplished without installation of infrastructures such as substations, transmission towers and installation of meters to record electricity consumption for periodic billing and recovery of charges etc. The appeals filed by the assessee are allowed.

Summary

Issues Involved:
1. Classification and rate of GST on various receipts related to the distribution of electricity.
2. Applicability of GST on specific services ancillary to the distribution of electricity.
3. Determination of whether certain services are exempt from GST under the relevant notifications.

Issue-wise Detailed Analysis:

1. Classification and Rate of GST on Various Receipts Related to Distribution of Electricity:
The applicant sought an advance ruling on the classification and applicability of GST on services rendered during the supply/distribution of electric energy. The application was admitted under Section 97(2)(a) & (e) of the CGST/SGST Act, 2017. The Assistant Commissioner, SGST, Dehradun, provided a report highlighting that certain services attract 18% GST, such as application fees for release of connection, rental charges against metering equipment, testing fees for meters/transformers, labor charges for shifting of meters and service lines, and charges for duplicate bills. However, charges for distribution and supply of electricity, such as fixed charges, demand charges, energy charges, etc., are exempt under Service code-996912.

2. Applicability of GST on Specific Services Ancillary to the Distribution of Electricity:
The applicant argued that electric energy is classified under HSN 2716 00 00, attracting a "nil" GST rate, and that transmission or distribution of electricity by an electricity transmission or distribution utility is exempt under Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017. The Authority confirmed that intra-State transmission or distribution of electricity is covered under Service Code 9969 and attracts GST @ "nil." However, the ruling diverged on other services ancillary to the transmission or distribution of electricity.

3. Determination of Whether Certain Services are Exempt from GST Under the Relevant Notifications:
The ruling highlighted different views on the ancillary services provided during the transmission or distribution of electricity. One member ruled that services such as application fees for releasing connection of electricity, rental charges against metering equipment, testing fees for meters/transformers, labor charges for shifting of meters or service lines, and charges for duplicate bills are taxable at 18% GST. Conversely, another member opined that these services should be treated as incidental to the transmission and distribution of electricity, thus covered under composite supply and exempt from GST. The latter view was supported by case laws like Noida Power Co. Ltd. v. Commissioner of C, Ex., Noida and Paschimanchal Vidyut Vitran Nigam Ltd. v. Commissioner of Central Excise, Meerut, which held that services related to the transmission and distribution of electricity are exempt from service tax.

RULING:
The Authority held that the following services provided by the applicant are exempt from GST:
1. Charges for distribution and supply of electricity such as fixed charge, demand charge, energy charge, fuel charge adjustment, excess load demand charge, low power factor surcharge, low voltage surcharge/high voltage rebate, wheeling charge, cross-subsidy surcharge, and additional surcharge.
2. Delayed payment surcharge.
3. Assessment against theft and unauthorized use of electricity.
4. Security deposits at the time of release of new LT connection and for enhancement in sanctioned load.
5. Security deposits at the time of release of new HT/EHT connection and for enhancement in sanctioned load.

However, due to differing views on other specific services rendered by the applicant, the matter was referred to the Appellate Authority for a final decision under Section 98(5) of the CGST/SGST Act, 2017.