2020 (7) TMI 106 - AAR - GST

Applicability of GST - transactions between TANGEDCO Ltd. TANTRANSCO Ltd, engaged in the generation and distribution of electricity - Deposit Contribution Works - TANGEDCO, Government Entity or not - Transmission Charges for Natural Gas. GST applicability on the transactions between TANGEDCO Ltd. TANTRANSCO Ltd - HELD THAT - Activity of payment of expenses incurred by TANTRANSCO relating to vehicle hire charges, maintenance of sub-stations, salary payments, etc and paid by TANGEDCO accounted as receivable in the books of the applicant. The said activity is not one involving services of distribution of electricity and therefore the exemption under Sl. No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 is not available for the stated transactions - Activity at Sl.No. 5 of Para 5.2 relates to receipt of Services from TANTRANSCO for which the payment is to be made by the applicant. Since the applicant is not the person supplying, this part do not fall within the purview of the Advance Ruling as per Section 95(a) of the CGST Act 2017 and hence not answered. Applicability of GST on Deposit Contribution Works - HELD THAT - DCW involve shifting service/line, Structure and equipment as per the request of the consumer, the charges for which are billed separately from the consumer. The works undertaken are Installation of transformers/lines and other accessories and are in the nature of installation of the structure and equipments classifiable under SAC 99873. Whether TANGEDCO ltd can be considered a Government Entity - HELD THAT - TANGEDCO Ltd is established by Government of Tamil Nadu vide G.O. Ms. No. 94 Energy (B2) Department dated 16.11.2009 with the primary object to function as generation and distribution utility in terms of the provisions of Electricity Act 2003. It is a public company wherein 99 percent shares are held by TNEB, the Holding Company, which is established by Government of Tamil Nadu with more than 90 percent equity shares and control. The appointments of the directors to TANGEDCO are by the Government. Thus TANGEDCO is a Public Limited Company established by Government of Tamil Nadu with more than 90 percent control for the purposes of generation and distribution of electricity. Hence, TANGEDCO Ltd is a government Entity for the purposes of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017 and 12/2017-C.T.(Rate) as amended vide Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017 and Notification No. 32/2017-C.T.(Rate) dated 13.10.2017 effective from 13.10.2017. Applicability of GST on Transmission Charges for Natural Gas - HELD THAT - An applicant can seek an Advance Ruling in relation to supply of goods or services or both undertaken or proposed to be undertaken by the applicant. Further, as per Section 103 (1) of the CGST Act, the ruling is binding only the applicant and the concerned officer or the jurisdictional officer of the applicant. In the case at hand, the applicant is the recipient of the services and not supplier of such service. Accordingly, this question is not liable for admission and therefore rejected.

Issues Involved:
1. GST applicability on the transactions between TANGEDCO Ltd. & TANTRANSCO Ltd.
2. Applicability of GST on Deposit Contribution Works (DCW).
3. Whether TANGEDCO Ltd can be considered a “Government Entity”.
4. Applicability of GST on Transmission Charges for Natural Gas.

Issue-wise Detailed Analysis:

1. GST Applicability on the Transactions Between TANGEDCO Ltd. & TANTRANSCO Ltd:
The transactions between TANGEDCO and TANTRANSCO include the supply of operation and maintenance materials, construction of sub-station buildings, erection of transformers, transfer of capital assets, transactions of physical fund flow, movement of employees, and receipt of TANTRANSCO’s income in TANGEDCO Bank A/c. The authority ruled that:
- Supply of operation and maintenance materials and transfer of capital assets are considered as 'supply of goods' and are subject to GST.
- Transactions of physical fund flow and receipt of TANTRANSCO’s income in TANGEDCO Bank A/c are transactions in money and thus not subject to GST.
- Movement of employees from TANGEDCO to TANTRANSCO is a 'supply of service' and is subject to GST.
- The exemption under Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 is not applicable to these transactions as they do not involve the mere distribution of electricity.

2. Applicability of GST on Deposit Contribution Works (DCW):
The DCW involves the shifting of service lines, structures, and equipment at the request of consumers. The authority classified these works under SAC 99873 (installation services other than construction) and ruled that GST is applicable as per Sl.No. 25 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017. The applicant's reliance on the Gujarat High Court's decision in the case of Torrent Power Ltd. Vs UOI was noted, but the ruling was based on the current applicable notifications and circulars.

3. Whether TANGEDCO Ltd can be Considered a “Government Entity”:
TANGEDCO Ltd is a public company established by the Government of Tamil Nadu with more than 90% control and equity participation. The authority confirmed that TANGEDCO qualifies as a 'Government Entity' as defined under Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, as amended by Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017 and Notification No. 32/2017-C.T. (Rate) dated 13.10.2017.

4. Applicability of GST on Transmission Charges for Natural Gas:
The applicant is the recipient of natural gas from GAIL, which charges GST on transmission charges along with VAT on the sale of natural gas. The authority ruled that since the applicant is the recipient and not the supplier of the service, the question does not fall within the purview of an advance ruling as per Section 95(a) of the CGST Act. Hence, this question was not admitted and not answered on its merits.

Ruling Summary:
1. GST is applicable on the supply of operation and maintenance materials and transfer of capital assets to TANTRANSCO.
2. GST is applicable on the deployment of employees to TANTRANSCO as it is a supply of service.
3. GST is not applicable on transactions of physical fund flow and receipt of TANTRANSCO’s income in TANGEDCO’s bank account as these are transactions in money.
4. The exemption under Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 is not applicable to the stated transactions between TANGEDCO and TANTRANSCO.
5. Depository Contribution Works (DCW) is classifiable under SAC 99873 and is subject to GST.
6. TANGEDCO is a 'Government Entity' for the purposes of the relevant GST notifications.
7. The applicability of GST on transmission charges billed by GAIL was not answered as it was not admitted under the advance ruling provisions.

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