2018 (5) TMI 1391 - HC - GST

Levy of GST on Supply of electricity meters for hire - Applicability of circular issued during the service tax regime, to the GST regime when the main activity is exempt under both the regime - Summons issued for calling for information and documents - Exemption from service tax - transmission and distribution of electricity by an electricity transmission or distribution utility. - Applicability of new clarification dated 1.3.2018 over clarification dated 7.12.2010 - Demand can be raised w.e.f 1.3.2018 or w.e.f. 1.7.2017. HC granted interim relief - Till further orders, the petitioners shall not have to reply to such summons dated 28.3.2018.

Summary

Issues:
Interpretation of exemption under GST regime for transmission and distribution of electricity and connected services.

Analysis:
The case involves a challenge by an electricity company regarding the interpretation of exemption under the Goods and Services Tax (GST) regime for transmission and distribution of electricity and connected services. The petitioner, an electricity company engaged in generation, transmission, and supply of electricity, relied on a Government clarification dated 7.12.2010 which exempted transmission and distribution of electricity from service tax under the earlier VAT regime. The petitioners argued that this exemption extended to services directly related to transmission and distribution, such as supplying electricity meters for hire to consumers.

Under the new GST regime, a similar exemption was provided for "Transmission or distribution of electricity by an electricity transmission or distribution utility" under heading 9969. However, a clarification issued by the Government of India on 1.3.2018 specified that certain incidental or connected services, such as application fees, rental charges for metering equipment, testing fees, labor charges, and charges for duplicate bills, would not be exempt and would be taxable.

Subsequently, the departmental authorities issued summons to the petitioner demanding information and documents, including financial statements, income bifurcation for various services, and bank statements for specific financial years. The petitioner contended that the Government's clarification regarding taxable incidental services cannot be applied retrospectively and should not cover the period before the introduction of GST. The petitioner argued that since the exemption for electricity companies remained under the GST regime, the clarification on incidental services should not alter the tax treatment of such services.

The court, after hearing the arguments, directed that the petitioners were not required to respond to the summons dated 28.3.2018 until further orders. The court allowed direct service in this matter and scheduled the next hearing for 3.5.2018. The judgment reflects the complexity of interpreting tax exemptions under the GST regime and the need for clarity on the tax treatment of incidental services related to the transmission and distribution of electricity.