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TMI Blog2020 (7) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... vance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered a Government Entity 4. Applicability of GST on Transmission Charges for Natural Gas. The Applicant submitted copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The Applicant is a subsidiary of Tamil Nadu Electricity Board Limited (TNEB Ltd), which is 100% owned by Government of Tamil Nadu. TNEB Ltd is an investment Company only, no other business transactions are being carried out. TANGEDCO is an Electricity Distribution utility under Electricity Act, 2003. As per the provisions under the Section 131 of the Electricity Act, 2003, TNEB was restructured on 1.11.2010 into TNEB Limited; Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO); and Tamil Nadu Transmission Corporation Limited (TANTRANSCO). TANGEDCO is in the service of Generating and Distributing (sale of) Electricity in the state of Tamil Nadu TANTRANSCO Ltd. is in the business of Transmission of Electricity. TANGEDCO has its own stations for the purpose of generating electricity like Thermal Stations Ennore (ETPS), Mettur I (MTPS-I), Mettur II (MTPS-II), North Chennai I (NCTPS-I), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outstanding liabilities are treated as payable and receivable in respective company accounts. The applicant has stated that the transactions are in the course of generation, transmission and distribution of electricity. This activity of transmission, or distribution of electricity by an electricity transmission or distribution utility is exempt under SI.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 with corresponding exemption for SGST. The applicant has sought Advance ruling to confirm that the above said activity is exempt under Sl.No.25 of Notification No.12/ 2017-Central Tax (Rate) 2.3 The applicant has stated that Under the Electricity Act, 2003 (Central Act 36 of 2003) the State Electricity Regulatory Commission shall specify an Electricity Supply Code to provide for recovery of electricity charges, intervals for billing of electricity charges, disconnection of supply of electricity for non-payment thereof, restoration of supply, tampering, distress or damage to electrical plant, electric lines or meter, entry of distribution Licensee or any person acting on his behalf for disconnecting supply and removing the meter, entry for replacing, altering o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r supply of services. b) Charges in question are prescribed under law in force. ii) The charges are part and parcel of electricity supply under the Electricity Act 2003 a) Under the Code, the charges are actual cost of materials, loading, unloading, and transport and erection charges. Therefore, these are not any service independent of the supply of electrical energy or transmission and distribution of electricity. b) These charges are statutorily included in the value of supply as stated in (1) above. c) Supply of electricity, unlike other goods / services, presupposes erection and creation transmission and distribution equipment and cables. What is transport for physical goods, is transmission and distribution for electricity or electrical energy. d) Under definition 2(hh) in the Code as also u/s 2(17) of the Electricity Act, 2003 distribution licensee means a licensee authorized to operate and maintain a distribution system for supplying electricity to the consumers in his area of supply. Under 2 (s) Supply in relation to electricity, means the sale of electricity to a license or consumer. U/s 2 (15) of the Electricity Act, 2013 Consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued there under). As per Notification 11 /2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017, their establishment is to be treated as Government Entity. In the light of the facts, status and functions of TANGEDCO, the applicant has requested to confirm if they would be regarded as Govt. Entity more specifically for the purposes of Notification No. 11/2017 CTR, Notification No.12/2017 and Notification No.13/2017 as amended by Notifications cited in terms of clause (b) of Sec.97 (2) the CGST Act, 2017. 2.4 Finally, the applicant has requested to clarify the applicability of GST on transmission Charges on Natural Gas. The statement of relevant facts submitted by the applicant is as follows: TANGEDCO has Gas Turbine Stations (GTS) at Kuttalam, Ramnad and Kovilkalapal. In Kuttalam, Ramnad and Kovilkalapal zones, GAIL receives gas from ONGC at the respective CTPs of ONGC and injects into GAIL s pipeline and transports the gas to the Delivery Point (door step) of TANGEDCO GTS which is within TANGEDCO s premises. The risk and title of the gas from GAIL shall be passed on to TANGEDCO at the delivery point of TANGE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ways referred to in Clause(33) by a dealer either directly or through another... Explanation II to this sub-section provides that Subject to such conditions and restrictions, if any, as may be prescribed in this behalf-(i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or before the delivery thereof . Thus, the applicant has submitted that in terms of the above provisions, the transmission of gas by GAIL is part of the amount for which goods are sold. 3.1 The authorized representative of the applicant was heard in the matter on 21.06.2018. They stated that there are various activities between TANGEDCO and TANTRANSCO. The detailed write-up of each of them along with the financial transactions for all substantiated by invoices, all MOUs, any tripartite agreements, IT returns, Balance Sheets, Statement of accounts of both TANGEDCO and TANTRANSCO, Invoice contract for DCW with reference to the code given, Memorandum, Article of Association to justify government entity, Contract, invoice with GAIL were undertaken to be submitted. They also stated that their activities were exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Government entities have been exempted. For example, the following Notifications refer:- Notification No. 11/2017-C.T. (Rate) dt.28.6.2017 (as amended) Notification No. 12/2017-C.T. (Rate) dt.28.6.2017 (as amended) Since the exemptions are to be strictly construed, ARA is requested to confirm if TANGEDCO would be regarded as Govt. Entity for the purposes of exemptions under the two notifications cited. IV. Applicability of GST on Transmission Charges for Natural Gas As far as the above question is concerned, since the natural gas is outside the purview of GST and only Central Excise duty/ VAT are applicable for its manufacture/Sale, the question as to whether (i) that transmission charges, merely because it is claimed separately by GAIL, would not be chargeable to GST as supply of service, and (ii) would the transmission charges be outside the purview of GST as part of value of natural gas sold at TANGEDCO s premises. ARA is requested to answer the above question in terms of clause (b) of Sec.97 (2) the CGST Act, 2017. Extracts of provisions of the Electricity Act submitted to highlight that Transmission and Distribution of Elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. In respect of DCW, they undertook to submit a complete transaction, works contract and invoice raised on the customer in 1 week. 5.2 The Applicant filed Additional written submission with the details as undertook by them during the personal hearing held on 25.02.2019. The applicant furnished documents for DCW from the initiation of DCW till its completion by TANGEDCO on behalf of the consumers. The Applicant had elaborated the transactions between TANGEDCO and TANTRANSCO synopsis of the same is as follows: TRANSACTIONS BETWEEN TANGEDCO AND TANTRANSCO TANGEDCO and TANTRANSCO are two subsidiary companies of the Holding Company, TNEB Limited. In view of the query on the applicability of GST on the various transactions between the TANGEDCO and TANTRANSCO, as requested in the hearing dt.25.02.2019, the nature of transactions, quantum of value such transactions for, the Financial Year 2015-16 as per the audited accounts of TANGEDCO and TANTRANSCO are submitted below. Sl. No. Description of transaction Transferred from TANGEDCO to TANTRANSCO Account head 28.861 Transferred from TANTRANSCO to TAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle Advance, Festival Advance, Education Advance which are all pending to be recovered in subsequent salary, such advances would be transferred to the respective companies, where the employees will join on transfer / promotion. Similarly, the General Provident Fund and Contributory Pension Scheme Fund balances of those transferred employees would also be transferred to the respective company books of accounts. All such transfers are accounted based on only actual values. 38.88 11.17 5. Even though TANGEDCO and TANTRANSCO are subsidiary companies, the long term open access transmission charges has to be paid to TANTRANSCO by TANGEDCO every month. This transmission charges is fixed by Hon ble TNERC based on the Electricity Act Regulations. As there is financial difficulty in TANGEDCO the prescribed claim of Transmission charges are not actually remitted by TANGEDCO to TANTRANSCO and booked as payable in books of accounts. In the regular fund flow management both the companies are swapping their available funds on day to day basis. 1621.15 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve set of activities contributing to the achievement of transmission and distribution of electricity in terms of the provisions of the Electricity Act 2003 would defeat the exemption. We do not find merit in this argument. Transmission and Distribution are by themselves two different activities and the utilities are registered independently. The reading of the exemption notification also is very clear and is applicable only to the Distribution of electricity . The Constitution bench of Honble Supreme Court in the case of Commissioner of Customs (Import), Mumbai v. Dilip Kumar Company (2018 (361) E.L.T. 577 (S.C.)] = 2018 (7) TMI 1826 - SUPREME COURT , while answering the question, what is the interpretative rule to be applied while interpreting a tax exemption provision/notification when there is an ambiguity as to its applicability with reference to the entitlement of the assesse or the rate of tax to be applied? Has held that 52. To sum up, we answer the reference holding as under - (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable supply under GST is examined and then the applicability of the exemption entry is taken up for decision. Supply is defined under Section 7 of the COST Act 2017 and the same is reproduced below for reference: 7. (1) for the purposes of this Act, the expression supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II; Section 2(17) of the Act defines Business as under (relevant portion extracted): (17) business includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets relating to TANTRANSCO will be transferred to TANTRANSCO. It is seen that Schedule II to the Act, specifies the activities which are to be treated as supply of goods or services and SI.No. 4 of the schedule deals with the Transfer of Business Assets , the related entry is as follows: 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person; In the case at hand, the assets transferred by the applicant to TANTRANSCO are business assets as no longer to form a part of their assets. Therefore, the said Transfer of assets is a Supply of Goods and GST is applicable on the said supply 7.3.3 Transactions of physical fund flow: It is stated that since both the subsidiary companies are operating with huge cash loss, there are transactions of physical fund flow between the companies by the way of repayment of existing loan, availment of fresh loans, etc... to manage the financial difficulty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uling as per Section 95(a) of the COST Act 2017 and hence not answered. 7.4 To summarize the above, The supply of materials for day to day operations is supply of Goods and GST is applicable on such supply at such rates applicable to such goods. Transfer of Assets is Supply of Goods and GST is applicable on such supply at the applicable rates Transaction of Physical fund and receipt of TANTRANSCO s income in the applicant s bank A/c, being mere transaction in Money , GST is not applicable to such activities Movement of Employees of the applicant to TANTRANSCO being supply of manpower is a supply of service and GST is applicable on this activity. 8.1 The applicant has sought to clarify whether the above transactions being in the course of generation, transmission and distribution of electricity by an electricity transmission or distribution utility is exempt under Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017. The relevant statutory provisions are extracted as follows: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer of business Asset is a Supply of Goods and as the entry at Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, exempts only the services involving distribution of electricity, this supply of goods are not covered under the exemption stipulated at Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 as amended and are hence taxable. 8.2.3 It is held that GST is not applicable on the Physical fund flow as discussed in Para 7.3.3 supra which is a transaction in money as it is neither Goods nor services and therefore the applicability of exemption Notification do not arise to Physical fund flow and receipt of TANTRANSCO s income in the applicant s bank A/c 8.2.4 Movement of employees as discussed in Para 7.3.4 supra, is a supply of Manpower Service and not a service involving mere distribution of electricity. The exemption at Sl.No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, exempts only the services involving distribution of electricity and therefore the consideration received relating to deployment of services of employees to TRANTRANSCO are not exempted under Sl.No. 25 of Notification No. 12/2017-C.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s . 99873 Installation services (other than construction) This group includes physical placement, configuration, set-up, calibration and testing of proper operation of various types of machinery and equipment And the applicable rate of tax is as specified under Sl.No. 25 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and SI.No. 25 of Notification No. II (2)/CTR/ 532 (d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended, which is extracted below: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 25 Heading 9987 Maintenance, repair and installation (except construction) services. 9 - 9.3 Further, we find that CBIC Vide Circular No. 34/8/2018-GST dated 01/03/2018 issued in file F. No 354/ 17/2018-TRU, has issued clarifications as approved by the Fitment Committee to the GST council in its meeting held on 9 th , 10 th and 13th January ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entrusted by the Central Government, State Government, Union Territory or a local authority. From the submissions, it is seen 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. 11. Finally, the applicant has sought ruling regarding applicabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl.No. 25 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 as amended is not applicable to the below stated transactions between TANGEDCO Ltd and TANTRANSCO Ltd, namely- a. Supply of Operation and maintenance materials used in the regular day to day functioning as the same is Supply of Goods ; b. Transfer of capital Assets as the same is declared as Supply of Goods ; c. Deployment of Employee under their role and related fund flow-not a service involving distribution of electricity exempted in the said entry; 5. On the non-payment of long term open access transmission charges payable to TANTRASCO, no ruling is offered as the applicant is not the person supplying the service and Advance Ruling is a decision in relation to the supply undertaken by the applicant as per Section 95 (a) of CGST/TNGST Act 2017. 6. Depository Contribution Works is classifiable under SAC 99873 and the applicable rate of tax is CGST (4, 9% as per Sl.No. 25 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 and SGST C 9% as per Sl.No. 25 of Notification No. II (2)/ CTR/ 532 (d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended and the same is not exempted. 7. TA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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