In re Maharashtra State Electricity Transmission Company Limited (GST AAR Maharashtra)
Maharashtra Authority for Advance Rulings (AAR) has ruled that various works undertaken by the Maharashtra State Electricity Transmission Company Limited (MSETCL) at the request of dedicated consumers constitute a “supply” under the GST regime and are liable to an 18% tax. The ruling provides significant clarification on the tax treatment of activities paid for via “adjustable deposits” by entities like the National Highway Authority of India (NHAI) and Railways.
MSETCL approached the AAR to determine the GST implications on four distinct types of transactions it facilitates for dedicated consumers, often involving third-party contractors. The authority concluded that all these activities fall within the definition of supply, attracting GST at the time the consideration is received.
The primary services examined were:
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Shifting of Transmission Lines: When MSETCL shifts or raises the height of its transmission towers and lines at the request of a consumer, the AAR classified this as a service of “agreeing to do an act for a consideration.” This activity falls under the Service Accounting Code (SAC) 999792 and is subject to 18% GST.
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Construction of New Infrastructure: For works involving the construction of new EHV substations, lines, transmission bays, or express feeders for a dedicated user, the authority deemed these to be construction services. It classified them under SAC 998339, also attracting an 18% GST rate. This applies even though MSETCL uses external contractors to execute the work, as MSETCL is the entity providing the end service to the consumer.
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Allotment of Existing Assets: In instances where MSETCL allots a spare, existing asset, such as an express feeder or a bay, for the dedicated use of a consumer for a specific duration, the transaction was held to be a supply of service. The AAR classified this under SAC 997212, which covers rental or leasing services of industrial property, and levied GST at 18%.
A key aspect of the ruling addresses the timing and value of the supply. The AAR clarified that for all these transactions, the time of supply is determined by Section 13 of the CGST Act, 2017. This means the GST liability arises when the adjustable deposit or advance payment is received by MSETCL, not upon the completion of the work, which can often take two to three years. The value of the supply is to be determined as per Section 15 of the Act, which is the transaction value or the consideration received.
The authority also ruled on the treatment of adjustments to the deposits. If the initial deposit exceeds the final project cost and the excess amount is refunded to the consumer, MSETCL cannot claim a credit or refund for the GST already paid on that excess amount. Conversely, if the deposit falls short and MSETCL recovers the additional amount from the consumer later, GST must be paid on this subsequent recovery.
While the ruling provides clear classification and tax rates, the AAR declined to answer the question regarding the eligibility and timing of Input Tax Credit (ITC) on bills from contractors, stating the question was too generic in nature.
The ruling establishes a clear legal precedent for public utilities, affirming that works performed for specific consumers in exchange for consideration, even if termed a ‘deposit’, are commercial supplies firmly within the GST framework.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, MAHARASHTRA
