2020 (7) TMI 481 - AAR - GST

Classification of service - rate of tax - coal handling and distribution charges wherever supply of such services is intended to be made expressly to a customer - utilization of input tax credit - HELD THAT - U/s 16 (1) of CGST Act, every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person - U/s 49(4) of the Act, the amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed. Thus, the coal handling and distribution charges will be taxable @ 18% and not 5% wherever supply of such services only is intended to be expressly made to a customer - the input credit availed as per the conditions specified in section 16 shall be allowed for discharging the liability towards supply of coal and supply of coal handling and distribution charges respectively.

Summary

Issues Involved:
1. Taxability of coal handling and distribution charges.
2. Utilization of input tax credit for discharging liability towards supply of coal and coal handling and distribution charges.

Issue-wise Detailed Analysis:

1. Taxability of Coal Handling and Distribution Charges:
The first issue addressed was whether the Applicant is liable to discharge tax liability at 18% on coal handling and distribution charges when such services are intended to be made expressly to a customer or if the Applicant can charge GST at the rate of 5% as applicable on the supply of coal.

The Authority examined the relevant provisions of the CGST Act, 2017, and pertinent notifications. Notification No. 1/2017-Central Tax (Rate) specifies a CGST tax rate of 2.5% on the supply of coal, resulting in an effective rate of 5% (2.5% CGST + 2.5% SGST). Conversely, Notification No. 11/2017-Central Tax (Rate) provides for a CGST rate of 9% on intra-state supply of services under heading 9997, resulting in an effective rate of 18% (9% CGST + 9% SGST).

The Authority concluded that coal handling and distribution services fall under the category of services taxable at 18%. Therefore, wherever such services are intended to be expressly made to a customer, the applicable GST rate is 18%.

2. Utilization of Input Tax Credit:
The second issue was whether the Applicant is entitled to utilize the input tax credit availed for discharging liability towards the supply of coal and coal handling and distribution charges.

The relevant provisions of the CGST Act, 2017, were analyzed, particularly sections 2(62), 16, and 49. Section 2(62) defines input tax, and section 16 outlines the eligibility and conditions for taking input tax credit. Section 49(4) states that the amount available in the electronic credit ledger may be used for making any payment towards output tax under the Act.

The Authority opined that input credit availed as per the conditions specified in section 16 shall be allowed for discharging the liability towards the supply of coal and coal handling and distribution charges respectively.

Ruling:
1. Coal handling and distribution charges will be taxable at 18% and not 5% wherever supply of such services only is intended to be expressly made to a customer.
2. Input credit availed as per the conditions specified in section 16 shall be allowed for discharging the liability towards the supply of coal and coal handling and distribution charges respectively.

This ruling is valid subject to the provisions under section 103(2) until and unless declared void under section 104(1) of the GST Act.