April 13, 2021

Indian & World Live Breaking News Coverage And Updates

Indian & World Live Breaking News Coverage And Updates

Centre cannot charge GST on power services: Rajasthan High Court

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The (HC) has quashed a clarification issued by the Union government that had allowed the authorities to impose goods and services tax (GST) on certain portions of power supply.

Power distribution services draw zero rate since they fall under the negative list of services released by the Union government in 2017.

However, the Central Board of Indirect Taxes and Customs (CBIC) came out with a circular in 2018 imposing on various activities, such as application fee for releasing electricity connection, rental charges against metering equipment, testing fee for meters, capacitors, and duplicate bill charges. The circular was issued after the Council made recommendations to that effect, said Harpreet Singh, partner-indirect taxes, KPMG.

The petitioner — Jodhpur Vidyut Vitran Nigam, a public sector undertaking engaged in distribution and supply of electricity in various districts of Rajasthan — challenged the latest circular.

Its counsel argued that the circular carving out an exception and excluding some of the services, which are essential and integral to the main function of supply and distribution of electricity, is arbitrary.

He further argued that once the parent notification exempts the very supply and distribution of electricity from GST, the CBIC or even the GST Council cannot exclude certain services by way of a clarificatory circular. He said all services mentioned in the circular are nothing but a part of the complete package/bundle of services, namely supply and distribution of electricity.

The HC circular restrained the Union government from raising any demand and taking coercive measures to recover any tax on the basis of an impugned order.

“A well-reasoned ruling that has rightly looked into the substance of the transaction, which in the instant case was supply of electricity and thus, held that ancillary charges like meter rental, testing fees, duplicate bill charges, etc, cannot be carved out and made taxable,” said Singh.

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