GST Not Payable on Statutory Fees Collected by Electricity Regulators: P&H HC

Punjab State Electricity Regulatory Commission Vs Union of India and others (Punjab and Haryana High Court)

The Punjab and Haryana High Court allowed a writ petition seeking quashing of a show cause notice dated 28.06.2024, by which GST was sought to be levied on amounts collected by the petitioner as petition fee, ARR processing fee, and licence fee. The petitioner contended that these amounts were received strictly for discharging statutory functions under Section 86 of the Electricity Act, 2003, which are judicial, quasi-judicial, and inherently regulatory in nature, and therefore could not be subjected to GST.

The petitioner submitted that the issue was squarely covered by a recent judgment of the Delhi High Court in a batch of writ petitions decided on 15.01.2025, where GST demands raised on similar fees collected by an electricity regulatory commission were held to be unsustainable. The High Court in that case had examined the scheme of the Central Goods and Services Tax Act, 2017, including Sections 2(17) (definition of “business”), 2(31) (definition of “consideration”), Section 7 (scope of supply), Schedule II, and Schedule III.

The Delhi High Court had held that regulatory functions such as tariff determination, inter-State transmission regulation, and issuance of licences under the Electricity Act cannot be construed as activities undertaken in the course or furtherance of business. It observed that such functions do not resemble trade, commerce, manufacture, profession, or any similar activity contemplated under the definition of “business” in the GST law. Even assuming the fees collected could be termed as “consideration,” they were not received in the course or furtherance of business, which is a mandatory requirement for a transaction to qualify as a taxable “supply” under Section 7 of the CGST Act.