Case Law Details
Additional Director Directorate General of GST Intelligence (DGGI) & Anr. Vs Central Electricity Regulatory Commission (Supreme Court of India)
SC dismisses SLP against Delhi HC ruling that GST is not leviable on license fees collected by Electricity Regulatory Commissions: Supreme Court of India
Summary: The Supreme Court of India dismissed a Special Leave Petition (SLP) filed by the Directorate General of GST Intelligence (DGGI), upholding the Delhi High Court’s ruling that GST is not applicable to license fees collected by Electricity Regulatory Commissions. The case stemmed from a demand for service tax and GST on license fees collected by the Central and Delhi Electricity Regulatory Commissions, which the GST authorities contended were taxable “supply of services.” The regulatory bodies challenged this demand, arguing their functions were quasi-judicial and not a business activity subject to GST. The Delhi High Court had previously ruled in favor of the Commissions in the case of Central Electricity Regulatory Commission Vs Additional Director Directorate General of GST Intelligence (DGGI) & Anr. , stating that granting a license is a statutory obligation, not an activity in the course of business. The court also held that these Commissions perform quasi-judicial functions with the characteristics of a tribunal, and as such, their services are excluded from the definition of “supply” under Schedule-III of the CGST Act. The Supreme Court found no reason to interfere with this decision, agreeing that the regulatory functions do not fall within the ambit of “business” and the license fees do not constitute “consideration.” This ruling solidifies the legal position that statutory commissions carrying out regulatory and quasi-judicial duties are not subject to GST on the fees they collect for licenses.
Facts:
The Central Electricity Regulatory Commission (“the Petitioner”) and the Delhi Electricity Regulatory Commission were subjected to service tax/ GST demand on license fees collected for grant of licenses to various electricity operators. The GST authorities (“the Respondents”), contended that such license fee constituted taxable supply of services, distinct from adjudicatory functions, and argued that the regulatory activities fall under Group Heading 99863 (support services to electricity, gas and water distribution) of the GST Service Rates Notification dated June 28, 2017.
The Petitioner challenged the demand by filing a writ petition before the Delhi High Court. The Delhi High court allowed the writ petition and held that the grant of a license to transmit or distribute is clearly not in furtherance of business or trade, but in extension of the statutory obligation placed upon a Commission to regulate those subjects.
Aggrieved by this, the Revenue had sought a special leave petition before the Supreme Court.
Issue:
Whether the collection of license fees by Electricity Regulatory Commissions constitutes taxable supply under the CGST Act, 2017 or is excluded under Schedule-III as services rendered by a court or tribunal?
Held:
The Hon’ble Supreme Court in Special Leave Petition (Civil) Diary No. 32626/2025 held as under:
- Noted that, the Delhi High Court had quashed the GST demand and observed that Electricity Regulatory Commissions perform quasi-judicial functions with trappings of a tribunal.
- Observed that, the grant of license was in furtherance of a statutory obligation and not an activity in the course or furtherance of business.
- Noted that, the Delhi High Court had refused to draw a distinction between regulatory and adjudicatory functions in light of Schedule-III of the CGST Act, which expressly excludes services rendered by courts or tribunals from the scope of “supply.”
- Further noted that, the Delhi High Court rejected Revenue’s reliance on Section 2(24) (definition of “service”) and Section 2(17) (definition of “business”) of the CGST Act, 2017, holding that statutory regulatory functions do not fall within the ambit of “business” or constitute “supply.”
- Further noted that, the High Court had emphasized the absence of any inducement element in the license fee collected, thereby excluding it from the definition of “consideration” under Section 2(31).
- Noted that, the High Court had held that GST Service Rates Notification dated June 28, 2017 cannot override Schedule-III and, therefore, reliance on Group Heading 99863 (support services) was misplaced.
- The Supreme Court, agreeing with the High Court’s reasoning, held that there is no good ground to entertain these Special Leave Petitions and accordingly dismissed the same.
Our Comments:
The Supreme Court’s affirmation of the Delhi High Court’s judgment settles the legal position that regulatory and quasi-judicial functions performed by statutory Commissions are excluded from the scope of GST under Schedule-III of the CGST Act. The dismissal relies on the judicial interpretation that such statutory bodies are not engaged in “business” or providing “services” for consideration.
The Allahabad High Court in U.P. Electricity Regulatory Commission v. Addl. Commissioner of GST & Central Excise [WRIT TAX No. 239 of 2024, order dated November 19, 2024] had also granted stay on a similar SCN proposing GST levy on license fees, reinforcing the legal principle emerging from these decisions.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. We do not find any good ground to entertain these Special Leave Petitions. The Special Leave Petitions are, accordingly, dismissed.
3. Pending application(s), if any, stands disposed of.
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