Is Power Back charges liable to GST?

[Kapil Mahani]

Question : Whether the Power back up charges which are charged by the RWA/ commercial space is taxable to GST? If yes, then what is the GST rate on the same activity?

Sale or consumption of electricity is a State subject mentioned at Serial No. 53 of List-ll of VIIth Schedule to the Constitution of India under Article 246 of the Indian Constitution. This position has not been altered by the 101st Constitution of Amendment Act, 2016 and therefore, electricity remains outside the purview of the GST.  

Section 2(52) of the GST Act defines goods as "every kind of movable property other than money and securities but includes actionable claim, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply".  

Section 2(102) of the GST Act defines services as "anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged". 

Further, Notification No. 2/2017-Central Tax (rate), dated 28th June, 2017 pertains to goods, the intra-state supply of which is exempted under the GST Act. The Entry No. 104 of this notification is regarding Electrical Energy. This suggests that Electrical Energy is a goods and not a service. It is, therefore, clear that electricity is a good and not a service.  

Now the moot question is whether the supply of electricity via DG sets is a good or service  

In this regard, attention is drawn to the case of IN RE: M/S. PANSUT UDYOG PVT. LTD. - 2019 (3) TMI 1846 - AUTHORITY FOR ADVANCE RULING, HARYANA, wherein the Applicant is merely engaged in providing power backup services at the IT/ITES building in Gurugram and in pursuant to this activity, it is involved in the ancillary activities such as purchasing HSD, lubricants and maintenance services. The record relating to consumption of units is maintained by the applicant and the charges per unit are also fixed by it. Considering all these factors, this Authority ruled that the provision of power back-up services is not covered under the definition of ‘goods’ and hence the above said notification is not applicable to the instant case. 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 18%.  

Further, it is also worth noting that CBIC vide “FAQs on levy of GST on supply of services to the Co-operative Society- reg” dated 05­09-2017 has clarified that the amount collected towards the supply of power through Generator is taxable under the law.  

Basis the same, it can be deduced that the power backup provided by RWA is in form of a service. The charges for this supply are determined by RWA as per its convenience. The DG set belongs to the RWA, the expenses record pertaining to the DG set is also maintained by RWA. Therefore, the provision of electricity supply/power back-up via DG set is in the form of a service and not goods. In this manner, the electrical supply is liable to GST to the extent it is supplied through DG set. 

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