Taxability of additional surcharge collected by a ...

Electricity Surcharge for Open Access Consumers Taxable Under CGST Act; Input Tax Credits Allowed for Capitalized Goods.

November 21, 2024

Case Laws     GST     AAAR

Taxability of additional surcharge collected by a government-owned electricity distribution company from open access consumers who source electricity from private generators. The key points are: The company is exempt from filing certain GST returns and can claim input tax credit on capitalized goods/services and services for support/auxiliary supplies. It can also claim proportionate input tax credit on taxable output supplies of support services and goods like scrap. The company is eligible to claim taxes paid under reverse charge mechanism as input tax credit. The additional surcharge collected from open access consumers is to meet the fixed costs arising from the company's obligation to supply electricity as per power purchase agreements. This collection mechanism is backed by the Electricity Act, policies of the central and state governments, and regulations. The additional surcharge does not constitute consideration for tolerating an act but is collected to cover fixed costs incurred due to power purchase agreements. Therefore, it should form part of the taxable value u/s 15 of the CGST Act, 2017. However, the supply of electricity as goods or distribution of electricity as a service is exempt from GST under relevant notifications.

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