GST on sale of units generated from solar plant, Goods and Services Tax - GST

[Shreyansh Mehta]

i had given a work contract service of installling solar plant and claimed ITC on it and now i am selling the units generated from solar plant to the goverment of gujarat. so is gst is applicable on revenue generated from sale of units ?? and if i am selling the units to other person other than government am i liable to pay GST and if it is applicable can i availed ITC of work contract service against the liability.

Posts / Replies

[Charu Tyagi]

Though the Supply of electricity generation is exempted vide notification no. 02/2017 & Services provided by way of transmission or generation of electricity by an electricity transmission or distribution utility vide notification no. 12/2017 but in case any person other than Transmission and distribution utilities provides supply of electricity shall be levied GST.

Electrical power is a movable property and therefore distribution of the same covered as "Goods" As per section 2(52) of the CGST Act

Therefore distribution & transmission of electricity to government or non-government GST shall be levied and If ITC of works contract services is in line with business of distribution of electricity generation and transmission then ITC can be availed.

Due to incomplete facts of the case and business, the above advise is just mere a opinion on the issue, do not consider it as financial/legal advise

[Amit Agrawal]

Supply of Electrical energy is exempted from GST as per Serial No. 104 of Notification No. 2/2017-Central Tax (Rate) (as amended till date). Accordingly, no gst is payable by you against supply of Electrical energy either to Govt. or other person.

W.r.t. question of availability of ITC against purchase & installation of solar-plant, same is not available as per Rule 43 (1) (a) of the CGST Rules, 2017.

The questions about validity of above quoted sub-rule in view of wordings of Section 17 (1) & 17 (2) is ignored as same will be very aggressive view and which is definitely against intention of Govt. about entire ITC philosophy.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Sadanand Bulbule]

In terms of entry number 104 of the Notification No. 02/2017 dated 28/06/2017, the supply of "Electrical Energy" under HSN 2716 00 00 is exempt. Besides vide entry number 27 of the Notification No.12/2017, the transmission and distribution of electricity under HSN 9969 is also exempt. So the conjoint reading of these notifications makes it clear that, the question of claiming ITC on supply of electricity, being exempt from tax, does not arise.

Hence I go with the opinion of Sri. Amit Sir.

[Charu Tyagi]

As per Notification no.12/2017 transmission and distribution of electricity by transmission and distribution utility is exempt

Here utility is defined as the Authority engaged in transmission and distribution of electricity

In my opinion transmission and distribution of electricity by other than Utility or I say Authority is not exempt

"If any other expert has different opinion on that, is completely acceptable" please elaborate and explain - it would be nice to learn and understand

[Padmanathan Kollengode]

Smt Charu Ji,

As you rightly pointed out, electricity is a movable goods and hence, one has to refer to Notification No. 2/2017-CT (Rate) which provides exemption for goods. Entry 104 of Notification No 2/2017-CT(R) reads as under:

104.

2716 00 00

Electrical energy

Therefore, it is treated as supply of exempted goods.

[Charu Tyagi]

Shriman Padmanathan ji

My other point is transmission and distribution of electricity supply is supply of service and by Notification 12/2017 CGST(Rate) transmission and distribution of electricity supply by utility is exempt

So the transmission and distribution of electricity supply by other than Utility is not exempt, hence GST shall be leviable on such supply.

[Padmanathan Kollengode]

Smt Charu Ji,

The facts in the query is sale if units.

[Charu Tyagi]

Shriman Padmanathan ji

Got it, i misunderstood selling of units to any person other than government as distribution and transmission of units. So I asked for more facts of the query

Thank you 😊

[Padmanathan Kollengode]

Nice to have your views in this forum. Pls continue to contribute Charu ji🙂

[Charu Tyagi]

Definitely 💯😌

[KASTURI SETHI]

All the aspects of the issue have been covered. Where and how exemption is available and where and how exemption is not available is crystal clear with joint efforts of all the experts. I support the views of all experts. Efforts made by Madam Charu Tyagi have NOT ended in smoke. Emphasis laid on the word, 'utility' by her is very crucial in this scenario.

[Sadanand Bulbule]

Dear Charu madam

Your learning mindset is appreciated. This forum is for mutual learning relationship. Keep posting your views, whatever it may be.

[Alkesh Jani]

Shri

I hope decision of Gujarat High Court in case of M/s. Torrent Power Ltd. Vs. Union of India in - 2019 (1) TMI 1092 - GUJARAT HIGH COURT is relevant to the query.

Thanks

[Charu Tyagi]

It really feel nice and great when such experienced and senior members acknowledge and appreciates,

Thank You Sadanand Bulbule Sir, Kasturi Sethi Sir, Padmanathan Kollengode Sir.

I will keep contributing and keep learning from you all :)

[Shreyansh Mehta]

Thankyou members for the reply

The summary is that the sale of units generated from the solar energy is exempted as per Notification No. 2/17 irrespective i sold the units to government or some other person and i have to get a regsitration in gujarat ??. As my outward liability is exempted i cannot take an ITC against it.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Thanks a lot for posting the case law citation.

This case law deals with bundled service/composite supply. It is a Service Tax case. Other issues are also involved in this case. The analogy of this case law can be applied to GST law on the issue of composite supply but THE JUDGEMENT OF HIGH COURT OF GUJARAT AT AHMEDABAD in the case of TORRENT POWER LTD. Versus UNION OF INDIA - 2019 (1) TMI 1092 - GUJARAT HIGH COURT (R/Special Civil Application No. 5343 of 2018, decided on 19-12-2018) has been challenged by the department and SLP has been filed in Hon'ble Supreme Court. High Court Order stands stayed.

(1) Electricity Distribution services — C.B.I. & C. Circular No. 34/8/2018-GST, whether ultra vires Notification No. 12/2017-C.T. (Rate) and Section 8 of CGST Act, 2017? (2) Electricity Distribution services — Meter hiring, testing and shifting charges, application fee for electricity connection and charges for duplicate electricity bills, whether taxable?

The Supreme Court Bench comprising Hon’ble Mr. Justice A.M. Khanwilkar and Hon’ble Mr. Justice Dinesh Maheshwari on 9-8-2019 after condoning the delay granted leave in the Special Leave Petition (Civil) Diary No. 24733 of 2019 filed by Union of India against the Judgment and Order dated 19-12-2018 of Gujarat High Court in R/Special Civil Application No. 5343 of 2018 as reported in 2020 (34) G.S.T.L. 385 (Guj.) (Torrent Power Ltd. v. Union of India). While granting the leave, the Supreme Court passed the following order :

“Delay condoned.

Exemption from filing certified copy of the impugned judgment is allowed.

Leave granted.

Let this matter be listed in the third week of November, 2019 within the first five cases.”

The Gujarat High Court in its impugned order had struck down the C.B.I. & C. Circular No. 34/8/2018-GST being ultra vires Serial No. 25 of Notification No. 12/2017-C.T. (Rate) and Section 8 of Central Goods and Services Tax Act, 2017. Vide paragraph 4(1) of the aforesaid Circular the charges collected by DISCOM from consumers such as application fee for raising electricity connection, rental charges against metering equipment, testing fee for meters/transformers, capacitors, etc., labour charges for shifting of meters or service lines and the charges for duplicate bill, are liable to GST.

The High Court had further held that the meaning of transmission and distribution of electricity as prevalent in Service Tax regime did not change in GST regime. The activity of supplying electricity meters on hire to consumers having direct and close nexus with the transmission and distribution of electricity is eligible to exemption from GST.

The High Court had also held that the charges collected by DISCOM from consumers such as application fee for raising electricity connection, rental charges against metering equipment, testing fee for meters/transformers, capacitors, etc., labour charges for shifting of meters or service lines and the charges for duplicate bill, having direct nexus with transmission and distribution of electricity and said services being naturally bundled in the ordinary course of business and treated as single service of transmission and distribution of electricity, are eligible to exemption from GST.

[Union of India v. Torrent Power Ltd. - 22019 (8) TMI 779 - SC ORDER]

[Charu Tyagi]

Shreyansh Mehta ji.

As per your query if u take registration of GST you'll get refund of ITC on inward supply as per Section 54 of CGST Act.

[Padmanathan Kollengode]

I beg to differ. In my opinion, the question of refund itself does not arise as ITC itself is not allowed as per section 17 r.w.r 42 & 43.

[Amit Agrawal]

I respectfully differ with Ms. Charu Tyagi Ji for her post at Serial No. 17.

Relevant position from Section 54 (3) reads as follows:

"Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilised input tax credit shall be allowed in cases other than––

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

................................"

First, ITC itself is not available in subject scenarios under discussion here (unless and until one is thinking of challenging the validity of above quoted Rule 43 (1) in view of wordings of Section 17 (1) & 17 (2) which will be very aggressive view and which is definitely against intention of Govt. & entire ITC philosophy) which is not falling under zero-rated supplies. Hence, question of refund of non-existent ITC does not arise.

Even otherwise, above quoted Section 53 (3) specifically denies refund of accumulated ITC against 'output supplies which are nil rated or fully exempt supplies'.

Note: As a matter of fact, wordings of said Section 53 (3) (ii) gives further support to the argument challenging validity of rule 42 & 43 which denies ITC against goods / services used exclusively for effecting exempt supplies. But, that is matter for a separate debate.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Supply of electricity is exempt, so no ITC eligible.

However, if any part of the electricity is captively consumed for a taxable business, proportionate credit to be eligible. If no captive consumption, entirely to be reversed.

[KALLESHAMURTHY MURTHY]

I have read the opinions of the learned seniors in this forum. They have rightly expressed their views by referring to the relevant Notifications. The supply of electricity to the government or otherwise is exempted from GST. Where there is no output tax liability, there is no eligibility for ITC. The refund of ITC does not arise.

[Shailesh Bapat]

Dear Experts,

Notification No. 2/2017 - CT (R) dated 28th June 2017 states that 'Electrical Energy' is nil rated.

Notification No. 11/2017 _CT(R) dated 28th June 2017 states that 'Electricity distribution service' is taxable.

The GST Law operates on concept of supply. Then which kind of supply is covered under Notification No 2/2017 and by whom?

[KALLESHAMURTHY MURTHY]

Notification 2/2017 enumerates "Electricity Energy" (HSN Code: 27160000), as exempt from GST so also NNo. 12/2017 in entry No. 25 for Heading 9969 notifies tax rate nil for "Transmission or distribution of electricity by an electricity transmission or distribution utility". HSN Code 996911 is for "ELECTRICITY TRANSMISSION SERVICES" and 996912 is for "ELECTRICITY DISTRIBUTION SERVICES".

CBIC issued Circular No. 34/8/2018-GST which stated that any ancillary service provided by the above utility will be taxable under GST. These services include:

• Application fee for releasing connection of electricity
• Rental charges against metering equipment
• Testing fee for meters/transformers, capacitors etc
• Labour charges from customers for shifting of meters or service lines.
• Charges for duplicate bills.

The above supplies except for rental charges are on demand by the consumer and not naturally bundled with services. The Departmental taxing authorities can take these views to charge with GST.

It is clear that the transmission or distribution of electricity by an electricity transmission or distribution utility is exempted from the levy of GST from the two notifications. The Circular mentions other issues as liable to tax. The notification has a higher value than the Circular instruction which meant guidance to the Departmental Authorities not binding on the taxpayers. As learned Kasturi Sethi Sir, mentions the struck down of said circular by the hon'ble HIGH COURT OF GUJARAT, it is left to the decision of CBIC to take the further implementation of the Judgement.

However, the supply of electricity is exempt and not regarded with the availment of ITC in any way. ITC availment for the supply of services as per Circular is regulated u/s 16(2) of the CGST Act.

Disclaimer: I am not a professional. The contents are my personal opinion not to take as professional guidance.