In re Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Limited (GST AAR Madhya Pradesh)
Whether applicant is eligible to avail the exemption from the 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 of electricity utility’ with respect to the Delay Payment Charges recovered by the applicant from its consumers.
Held by AAR Madhya Pradesh
The Delayed payment surcharge/ Late Payment Surcharge/ Surcharge on outstanding amount (by whatever name called) cannot be treated as separate service and same shall be included in the value of initial supply to which such charges relate, and the portion of Delayed payment surcharge attributable to exempted supply will be exempted and the portion of Delayed payment surcharge attributable to taxable supply is taxable at the rate on which the corresponding supply is taxed.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MADHYA PRADESH
1. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and MP Goods & Services Tax Act, 2017 (hereinafter also referred to CGST Act and MPSGT Act respectively) by M/S Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company limited (hereinafter also referred to as applicant), registered under the Goods & Services Tax.
2. The provisions of the CGST Act and MPGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act.
3. BRIEF FACTS OF THE CASE –
3.1 The Applicant is a Public Sector Undertaking fully owned by Government of Madhya Pradesh and engaged in distribution and supply of electricity in 20 districts of Madhya Pradesh.
3.2 Applicant is involved in electrification work in to the rural and urban areas under the various Government Schemes; it supplies electricity to all the commercial users and noncommercial consumers and recovers charges for supply of electricity along with other non tariff.
3.3 Applicant issues bills of supply of electricity to its consumers, which has a particular due date to pay, every payment received after the due date mentioned in bills is liable to pay delay payment charges.
4. QUESTION RAISED BEFORE THE AUTHORITY –
4.1 Whether applicant is eligible to avail the exemption from the 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 of electricity utility’ with respect to the Delay Payment Charges recovered by the applicant from its consumers.
4.2 If answer of Question no. 1 is negative then what will be the applicable rate of tax and HSN/SAC code for Delayed Payment Charges.
5. DEPARTMENT’S VIEW POINT –
The concerned officer, The Joint Commissioner CGST and Central Excise Hqrs. jabalpur submitted that as per section 15(2)(d) of CGST Act. 2017 the value of supply shall include interest or late fees or penalty for delayed payment of any consideration for any supply. Further, as per the advance ruling authority order no. RAJ/AAR/2018-19/02, dated – 11/05/2018 passed by Rajasthan Authority of advance ruling, Goods and Services Tax, delay payment are taxable.
Further, as per the tariff heading – 9969 electricity distribution is taxable by 18%. Hence it appears that delay payment charges are taxable by 18% (9% CGST & 9% SGST) under HSN/SAC code-9969.
6. RECORD OF PERSONAL HEARING
6.1. Shree Anil Kumar, Authorized Representative of the company appeared for personal hearing on 11.09.18 and reiterated the submission already made in the application
6.2 He submitted that applicant is a Company fully owned and aided by the Govt. of MP. The applicant is a power distribution utility under Electricity Act, 2003 and distributes power to the consumers in eastern part of the state of Madhya Pradesh.
6.3. It is governed by Electricity Act 2003 and directions of Madhya Pradesh Electricity Regulation Commission (MPERC) are binding on the company. The Madhya Pradesh Electricity Regulatory Authority (MPERC) is an Independent Authority fix rates of supply of power in the State of Madhya Pradesh.
6.4. The MPERC exercises the powers conferred by section 50 of the Electricity Act, 2003 for framing rules and regulations to frame Madhya Pradesh Electricity Supply Code, 2013 same is reproduced under-
The State Commission shall specify an electricity supply code to provide for recovery of electricity charges, intervals for billing of electricity charges, disconnection of supply of electricity for non-payment thereof, restoration of supply of electricity; measures for preventing tampering, distress or damage to electrical plant, or electrical line or meter, entry of distribution licensee or any person acting on his behalf for disconnecting supply and removing the meter; entry for replacing, altering or maintaining electric lines or electrical plants or meter and such other matters.
6.5. In addition to the energy charges and distribution charges, the applicant also recovers some Non-Tariff charges from the consumer for certain specific activities carried out by the applicant for the consumer.
6.6. The various non-tariff charges collected from the consumer includes Delay Payment Charges.
The Madhya Pradesh Electricity Supply Code, 2013 specify the recovery the delayed payment Surcharge, same is reproduced under –
9.9 All categories of consumers committing default in the payment of the billed amount shall be liable to pay delayed payment surcharge, on the amount outstanding, at rates as per applicable retail supply tariff order
6.7. The Delayed payment surcharge is a part of Tariff prescribed by MPERC. The Company is duty bound to charge rates as fixed by the Authority and nothing in addition, in any manner. The Delayed Payment Surcharge is billed to consumer when the bill is paid by the consumer after the due date mentioned in the bill. The Delayed Payment Surcharge may be mentioned in the bill as Surcharge on Outstanding Amount or Late Payment Surcharge.
6.8 EXEMPTION NOTIFICATION FOR TRANSMISSION AND DISTRIBUTION OF ELECTRICITY BY UTILITY-
A. Electricity Transmission and Distribution Services –
I. Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 –
As per Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 the activity of Transmission or distribution of electricity by an electricity transmission or distribution utility is NIL rate of GST-
