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TMI Blog2024 (7) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... and supplies of services of transmission and distribution of electricity are separable - the amount is recovered from the consumers as non-tariff charge. This shows that the services of transmission of electricity is independent of the deposit contribution works under taken by the Applicant and accordingly do not fulfill all conditions specified in section 2 (30) of the CGST/OGST Act for the purpose of treating both the supplies as composite supply. Thus, the exemption notified for 'transmission and distribution of electricity' cannot be extended to the deposit contribution works (support services) undertaken by the applicant on the pretext of those being a part of the composite supply, which is far from true. Rather those support services in form of deposit contribution works provided by the applicant are taxable supplies irrespective of the fact that whether the same are supplied by contractors or third parties. Thus, the exemption is limited to Transmission and distribution' of electricity only. The deposit works undertaken by the Applicant is supplying support services to electricity transmission distribution classified under SAC-998631. The applicable rate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 and by virtue of provisions of Section 8 (a) of the CGST/OGST Acts 2017 has to be treated as a supply of the principal supply, namely, transmission and distribution of electricity and exempted or nil rated? (b) If it is held that, the consumer deposit work and 6% supervision charges received by the Applicant under situation 1 2 is taxable and liable to GST, whether the Applicant is eligible for ITC of GST paid to contractors on execution of said work and GST paid on materials and equipment supplied free of cost out of its stock which is centrally procured earlier of procuring project specific from third party vendor / supplier? (c) If it is held that the Applicant is eligible for ITC, whether any part of such input tax credit is required to be reversed under section 17 (2) of CGST Act read with Rule 42 and 43 of CGST Rules? 1.1 At the outset, we would like to make it clear that the provisions of both the CGST Act and the OGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the OGST Act. 2.0 Submission of the Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrally procured earlier or procuring project specific materials/equipments from third party vendor/supplier. Further, in both the situations, the consumer deposits 6% of the estimated cost of the deposit work plus GST as supervision charges for supervision and monitoring of execution of the deposit work. In both the cases GST is paid to the contractor for services provided and also on materials procured by the Applicant which is deposited by Applicant in compliance to GST law. 2.4 On completion of deposit works the exclusive right to operate, manage and maintenance of such electrical infrastructures shall rest with the Applicant and is used for transmission or distribution of electricity. In case of deposit work related to overhead lines shifting, the electrical line belongs to TPCODL are shifted as per request of consumer by using services of the contractor. The same shifting cost is treated as fresh assets in the books of TPCODL and used for transmission and distribution of electricity. 2.5 It has been contended that Entry No. 25 of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 exempts the services of transmission or distribution of electricity by an electricity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of electricity and taxed accordingly. 2.8 Hon'ble High Court of Gujarat, in its Judgment dated 19th December, 2018, in the case of M/s. Torrent Power Ltd. v. Union of India [2020 (34) G.S.T.L. 385 (Guj.)], has already clarified that The Meaning of Transmission and distribution of electricity does not change either for the negative list regime or the GST regime. Accordingly, the services which stood included within the ambit of transmission and distribution of electricity during the pre-negative list regime cannot now be sought be excluded by merely issuing a clarificatory circular, that too, with retrospective effect . Observing this, Hon'ble High Court has struck down paragraph 4 (1) of the Circular No. 34/8/2018-GST, dated 1-3-2018 as being ultra vires the provisions of Section 8 of the CGST Act, 2017 as well as Notification No. 12/2017-C.T. (R), dated 28-6-2017. The aforesaid judgment of the Gujarat High Court was followed by the Rajasthan. High Court in case of Jodhpur Vidyut Vitran Nigam Ltd. 2022 (56) G.S.T.L. 273 (Raj.) and a Division Bench of the Tribunal in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. 2022 (67) G.S.T.L. 86 (Tri.-Del.) and held that all services re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Judgments including Judgment of Hon'ble High Court of Gujarat in the case of M/s. Torrent Power Ltd. v. Union of India [2020 (34) G.S.T.L. 385 (Guj.)] / [2019] 101 taxmann.com 303 (Gujarat) which was followed by the Rajasthan High Court in case of Jodhpur Vidyut Vitran Nigam Ltd. 2022 (56) G.S.T.L. 273 (Raj.) and a Division Bench of the Tribunal in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. 2022 (67) G.S.T.L. 86 (Tri. -Del.) and requested to decide the issue accordingly. The Revenue has neither submitted its comments nor appeared for personal hearing. 3.1 Consequent upon appointment of New SGST Member vide Government of Odisha Notification No. 9739-FIN-CTI-TAX-0072/2017 dated 06.04.2024 communicated under Letter C.No. CCT-PEI-POL-0079-2021/5015/CT GST dated 10.04.2024, a fresh personal hearing was conducted on 23.04.2024. The Applicant through its representative Niranjan Swain, Advocate A K Varshney, TLT appeared for personal hearing. During P.H., they have submitted additional submission, wherein it has been contended that deposit work executed by applicant is an essential activity having direct and close nexus with transmission or distribution of electricity to the consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls and equipment supplied free of cost out of its stock which is centrally procured earlier or procuring project specific from third party vendor / supplier? (c) If it is held that the Applicant is eligible for ITC, whether any part of such input tax credit is required to be reversed under section 17 (2) of CGST Act read with Rule 42 and 43 of CGST Rules? 4.2 The issue was examined in detail. It is observed that the Applicant in addition to the principal activity of providing services of Transmission and distribution of electricity is also providing services in the form of Deposit Works to various consumers. As per the submission made to the application, the Applicant prepares estimated cost of the electrical infrastructures/electrical plant such as installations of bay, substations, underground cables, overhead lines shifting, etc including civil foundation wherever applicable, commonly known as 'deposit work' which is the cost of materials, equipments and services used plus applicable GST. The deposit work is either executed by the applicant or by the consumer. In case of deposit work related to overhead lines shifting, the electrical line belonging to TPCODL are shifted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity by an electricity transmission or distribution utility. Nil Nil 4.5 It is not disputed that the Applicant's main activity of 'transmission or distribution of electricity is rated 'nil' as per the above entry. But the issue to be decided is whether the activities of the Applicant as enlisted in the application are taxable or not. In this regard it is pertinent lo make a reference to the clarificatory circular issued with regard to the following services as approved by the Fitment Committee to the GST Council in its meeting held on 9th, 10th and 13th January 2018 as under Circular No. 34/8/2018-GST F. No. 354/17/2018-TRU dated 1st March 2018 Subject: Clarifications regarding GST in respect of certain services S.No. Issue Clarification 4 (1) Whether the Activities carried by DISCOMS against recovery of charges from consumers under State Electricity Act are exempt from GST? (2) Service by way of transmission or distribution of electricity by an electricity transmission or distribution utility is exempt from GST under Notification No. 12/2017-CT(R), SI. No. 25. The other services such as, - i. Application fee for releasing connection of electricity; ii. Rental Charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act for the purpose of treating both the supplies as composite supply. Thus, the exemption notified for 'transmission and distribution of electricity' cannot be extended to the deposit contribution works (support services) undertaken by the applicant on the pretext of those being a part of the composite supply, which is far from true. Rather those support services in form of deposit contribution works provided by the applicant are taxable supplies irrespective of the fact that whether the same are supplied by contractors or third parties. Thus, the exemption is limited to Transmission and distribution' of electricity only. 4.7.1 The deposit works undertaken by the Applicant is supplying support services to electricity transmission distribution classified under SAC-998631. The applicable rate of tax is 9% in view of Entry SI No. 25 of the Notification No. 11/2017-CT dated 28.06.2017. 4.8 As regards the question whether, the Applicant is eligible for ITC of GST paid to contractors on execution of deposit work and GST paid on materials and equipment supplied free of cost to the contractor, we notice that the Applicant would lay down the required electrical infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Sections (a) of the CGST/OGST Acts 2017 has to be treated as a supply of the principal supply, namely, transmission and distribution of electricity and exempted or nil rated? Ans : Answer is in the 'Negative' Q.2 If it is held that, the consumer deposit work and 6% supervision charges received by the Applicant under situation 1 2 is taxable and liable to GST, whether the Applicant is eligible for ITC of GST paid to contractors on execution of said work and GST paid on materials and equipment supplied free of cost out of its stock which is centrally procured earlier or procuring project specific from third party vendor / supplier? Ans: ITC can be admissible to Plant and Machinery means apparatus, equipment and machinery fixed to the earth by foundation or structural support that are used for making outward supply of goods and services or both in accordance with the explanation provided under the third proviso to sub-section (5) of Section 17 of the CGST Act. Q.3 . If it is held that the Applicant is eligible for ITC, whether any part of such input tax credit is required to be reversed under section 17 (2) of CGST Act read with Rule 42 and 13 of CGST Rules? Ans : Y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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