2019 (3) TMI 1846 - AAR - GST

Classification of goods - supply of Electrical energy units through diesel generators - covered under Tariff code-27160000-ElectricaI Energy, attracting NIL rate of Tax or not - HELD THAT - The facilities provided by the applicant are not classified as goods rather as services. The provision of power back-up in a commercial or residential building is in the form of a service, whatever name it may be assigned- be it utility services, maintenance services or any other service. These services are covered under the Chapter 99, Heading 9972, Group 99722 and HSN Code 997221 (Property management services on a fee or commission basis or on contract basis). As such, the service is liable to CGST @ 9% and SGST @9%.

Summary

Issues:
Interpretation of the applicability of tax rates on the supply of electrical energy through diesel generators in the context of facility management services.

Analysis:
The applicant, providing facility management services to an IT/ITES building in Gurugram, installed diesel generators incurring costs on HSD, lubricants, and maintenance services. Billing for electrical energy supplied by diesel generators to individual tenants is done based on separate meter readings, with charges per unit on a cost basis. The applicant claimed the supply of electrical energy units through diesel generators falls under the Tariff code-27160000-Electrical Energy with a NIL tax rate, seeking confirmation on the tax rate applicability.

The Jurisdictional Officer opined that the applicant is engaged in facility management services related to electricity supply through generators, and thus, the exemption for electrical energy should not apply. The Authority, after considering submissions and comments, noted that although electrical energy supply attracts a NIL tax rate, the applicant is not an electricity generating or distributing agency but provides power back-up services. The Authority concluded that power back-up services do not fit the definition of 'goods,' making the notification on electrical energy inapplicable to the case.

The Authority classified the facilities provided by the applicant as services rather than goods. Power back-up services in commercial or residential buildings, regardless of the assigned name, are considered services falling under Chapter 99, Heading 9972, Group 99722, and HSN Code 997221 (Property management services). Therefore, the service is subject to CGST and SGST at 9% each.

In conclusion, the Authority ruled that the applicant's services are not goods but services, subject to CGST and SGST at 9% each, highlighting the distinction between the provision of power back-up services and the supply of electrical energy for tax rate determination.