In re M/s Tp Ajmer Distribution Limited Florence (AAR Rajasthan)
Also Read AAAR Ruling- No GST on Delayed electricity Payment charges: AAAR
(A) SUBMISSION OF APPLICANT
1. M/s TP Ajmer Distribution Limited (‘TPADL’ or ‘Applicant’ or ‘the Company*); having Goods and Services Tax (“GST’) Registration No. 08AAGCT2158P1ZR and is engaged in the business of distribution of electricity; has submitted that,
1.1 The Tata Power Company Limited (‘TPCL’) has signed a Distribution Franchisee Agreement (‘DFA’) with Ajmer Vidyut Vitran Nigam Limited (‘AVVNL’) to cater to the power requirements of customers in Ajmer, Rajasthan for a period of 20 years. To serve the aforesaid purpose, TPCL has formed a Special Purpose Vehicle (‘SPV’) called TPADL, which will be responsible for operating and maintaining the distribution network in Ajmer City. It will also be responsible for managing the billing and collections in the said areas.
1.2 They are engaged in the activity of distribution of electricity. For the aforesaid service, distribution charges are recovered from the customers. In order to distribute electricity, TPADL carries out various activities and makes separate recoveries from its customers. The list of various recoveries made are provided below:
| Type of Charges | Description of Charges |
|---|---|
| Application fees | New consumer who applies for a new connection is required to pay an application fee. |
| Re-connection charges | For any reason if the line is dis-connected and the consumer wishes to re-connect, then re-connection charges are recovered |
| Connection Transfer Fee | In case of transfer of connection, a fee is charged from the consumer. Transfer means transfer to a new location or transfer of name |
| Charges to be recovered for releasing temporary Connections | Charges are recovered for releasing of temporary connections. The charges include advance against electricity consumption, security and application fees and service line charges. |
| Charges for duplicate bill | In case of duplicate bill required by consumer, charges are recovered |
| Additional amount to be deposited on demand for extension of distribution mains/SuppIy line | This amount is collected for extension of the distribution mains/ supply lines. There is certain amount of material which is used in the present case. |
| Security Deposits for Electricity Consumption | This is a refundable security deposit w’hich is collected from the consumers |
| Security Deposits against Meters | This is a refundable security deposit for the meter installed at the customer’s premises |
| Rent for metering equipment | Rent is collected for metering equipment for industrial consumers |
| Meter Testing Fees | In case a consumer complains about a defect on the meter, a fee is collected for testing the meter |
| ABT compliant meter | ABT means Availability Based Tariff Meters. This is fee for ensuring compliance as per the regulatory norms |
| Change of meter | In case of a change in the meter, charges are recovered from the consumer |
| Labour charges for shifting of meter in the same premises | In case there is a shifting of the meter for any reasons, labour charges are recovered from the consumer |
| Cost of Meter Box / Panel | In case of change in the meter box or panel, charges are recovered |
| Re-sealing Charges ( if found broken) | At the time of meter installation, a seal is put on the meter. In case the seal is broken then the same needs to be replaced. Charges are recovered for the same. |
| Replacement of broken glass (Per Glass) | Charges are recovered for replacement of the glass of the meter |
| Transformer Rent | In certain cases (specially industrial consumers), the transformer is provided on rent |
| Transformers Testing Fees | In certain cases a fee is charged for testing of transformers |
| Capacitor Units Testing Fees | Capacitor unit is equipment used to maintain the power factor of electrical installation. This fee is taken to ensure that the capacitor units are maintaining the power factor as per norms given by the regulator “Power Factor” shall mean the monthly average power factor determined as the ratio of total Watt Hours to corresponding Volt Ampere Hours. |
| Fee charged for testing of consumer’s installation | These charges are recovered for any addition/ alternation on consumer installation. Installation shall mean the whole of the electric wires, fittings, motors and apparatus erected and wired by or on behalf of the consumer, on his premises. |
| Charges for alteration/shifting of service line | In case of shifting of the service line from the pole to the home, charges for alteration/ shifting are recovered. Such charges may also be recovered in case of shifting of lines within the premises. Moreover, if there is pole near the consumer’s home, the consumer may want the same to be shifted on account of safety issues or any alteration or extension of his house. |
| Cheque dishonour fee | In case the cheque given by the consumer is dishonoured, charges are recovered |
| Delayed payment Charges | In case of delay in payment by the consumers of the electricity bill, delay payment charges is collected from the consumers |
1.3 They submitted that, the aforesaid non-tariff charges are fixed and recovered from the customers in accordance with the provisions of Electricity Act, 2003 and the regulations made in this behalf by the Rajasthan Electricity Regulatory Commission (State Commission) (‘RERC’). RERC has prescribed various regulations in terms of powers granted to it under the Electricity Act, 2003 for determination of the tariff and non-tariff charges, specify the obligations of a licensee etc.
1.4 The applicant has also submitted that under the GST regime, as per Entry No. 25 of Notification 12/2017 – Central Tax (Rate) dated 28.06.2017, exemption from levy of GST has been granted to the activity of Transmission or distribution of electricity by an electricity transmission or distribution utility. Corresponding notifications have also been issued under the IGST Act and SGST Act – Notification No. 9/2017 – Integrated Tax (Rate) dated 28.06.2017 and SGST-No. F 17(131) ACCT/GST/2017/6822 dated 29.06.2017
(B) ISSUE FOR DETERMINATION
2. The question/ issue before the authority of advance Ruling (AAR) for determination are:
a. Whether TPADL is eligible to avail the exemption from levy of GST under Entry No. 25 of Notification 12/2017 – Central Tax (Rate) dated 28.06.2017 bearing description ‘Transmission or distribution of electricity by an electricity transmission or distribution utility’ with respect to the non-tariff charges recovered by TPADL from its customers?
b. Whether TPADL is liable to pay tax on the aforesaid recovery made from its customer?
(C) SUBMISSION BY THE APPLICANT
3 The applicant has submitted the following provisions of GST in their support,
3.1 In accordance with Section 9 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) and Section 5 of the IGST Act, which provides for charging of GST, GST is levied at the rate prescribed on all intra-state and inter-state supplies of goods/ services.
3.2 As per Section 7 (1) of the CGST Act, ‘Supply’ includes all forms of supply of goods/ services such as sale, barter, transfer, 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, including activities specified under Schedule I which are made with or without consideration. Further, Schedule II to the CGST Act specifies activities w’hich are to be treated as supply of goods or supply of services, respectively. However, activities or transactions specified in Schedule III as outside the ambit of’Supply’.
3.3 It is further pertinent to note that intra-state and inter-state supplies of electrical energy which is classifiable under Chapter Heading 2716 00 00 of the Customs Tariff Act. 1975 is exempt (NIL rate of tax) vide Notification No. 2/2017 – Central Tax (Rate) dated 28.06.2017 and Notification No. 2/2017 – Integrated Tax (Rate) dated 28.06.2017, respectively.
3.4 Further, services by way of transmission or distribution of electricity by an electricity transmission or distribution utility have been exempted vide the Exemption Notification. The relevant extract of the Exemption Notification is reproduced hereunder:
”Transmission or distribution of electricity by an electricity transmission or distribution utility “
3.5 Serial No. 2(z) of the Exemption Notification defines electricity transmission or distribution utility as under:
“electricity transmission or distribution utility” means the Central Electricity Authority; a State Electricity Board; the Central Transmission Utility or a State Transmission Utility notified under the Electricity Act, 2003 (36 of 2003); or a distribution or transmission licensee under the said Act, or any other entity entrusted with such function by the Central Government or, as the case may be, the State Government “.
3.6 Further, some of the relevant terms as defined under the Exemption Notification are provided below:
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