2023 (11) TMI 1056 - HC - GST

Exemption from GST - activities carried by DISCOMS against recovery of charges from consumers under State Electricity Act - guarantee provided by State Government to state owned companies against guarantee commission - HELD THAT - The petitioner was neither collecting nor depositing GST, in respect of the services in question, prior to the issuance of the impugned circular. However, notwithstanding that paragraph No. 4 of the circular was quashed by the Gujarat High Court, the petitioner has continued to collect GST from its consumers and deposit the same with the GST authorities. Resultantly, the consumers are now burdened with the liability to pay GST in respect of services, which according to the petitioner are exempt from the levy of GST - it is found difficult to accept that the petitioner could collect any GST from its consumers after paragraph 4 of the impugned circular had been set aside. It is considered apposite to defer the consideration of the present petition - List on 08.01.2024.

Summary

Issues involved: Impugning a circular regarding GST exemption for certain services related to distribution of electricity.

Summary:

Issue 1: Interpretation of Circular No. 34/8/2018-GST

The petitioner challenges paragraph 4 of Circular No. 34/8/2018-GST, which raised questions on the exemption of certain services related to electricity distribution from GST. The petitioner argues that services like application fees, rental charges, testing fees, and labor charges should not be subject to GST as they are part of the exempted distribution of electricity service.

Issue 2: Impact of Circular on GST Collection

The petitioner, an electricity distribution company, was not collecting GST on the mentioned services before the circular. However, due to the circular, the petitioner started collecting GST from consumers and remitting it to authorities. The Gujarat High Court had previously set aside paragraph 4 of a similar circular, relieving companies from collecting GST on these services. Despite this, the petitioner continued to collect GST, burdening consumers with unnecessary tax liabilities.

Resolution:

The High Court deferred the consideration of the petition due to related matters pending before the Supreme Court. However, it directed the petitioner to deposit any GST collected on the disputed services with the Court monthly. The petitioner must maintain detailed records of consumers from whom funds were collected for potential refunds. The case is listed for further proceedings in January 2024.