No GST payable on supply of electricity: AAR, Maharashtra

Summary: In the case of In Re: AES Engineering Solar (P.) Ltd. [GST/ARA/04 of 2023-24/2024-25-57], the Maharashtra Authority for Advance Rulings (AAR) determined that the supply of electrical energy by AES Engineering is exempt from Goods and Services Tax (GST) under Entry No. 104 of Notification No. 2/2017-Integrated Tax (Rate) dated June 28, 2017. The AAR clarified that electrical energy qualifies as a good under GST laws and is not liable for GST in both intra and inter-state supplies. Additionally, the ruling stated that the applicant would not be eligible to claim Input Tax Credit (ITC) on the GST paid for procuring the solar power plant, as the outward supply of electrical energy is exempt under Section 17 of the Central Goods and Services Tax Act and relevant rules. It was noted that no GST would be applicable for services related to the transmission of electricity, further confirming the exempt status of such supplies. The case underscores the regulatory framework surrounding the supply of electricity and its treatment under GST laws in India.

The AAR, Maharashtra in the case of In Re: AES Engineering Solar (P.) Ltd. [GST/ARA/04 of 2023-24/2024-25-57 dated July 31, 2024], ruled that the supply of electrical energy by the AES Engineering was exempt from levy of GST as per Entry No. 104 of Notification No. 2/2017-Integrated Tax (Rate) dated June 28, 2017 , and Notification No. 2/2017-Integrated Tax (Rate) dated June 28, 2017 (“the Goods Rate Exemption Notifications”) and is therefore, not liable to pay GST on supply of electricity. Further, the Applicant would not be eligible to claim ITC relating to GST paid on procurement of solar power plant as the outward supply is exempt from levy of GST as per Section 17 and of the Central Goods and Services Tax Act (“the CGST Act”) and Rule 42 and 43 of the Central Goods and Services Tax Rules (“the CGST Rules”).

Facts:

M/s. AES Engineering Solar (P.) Ltd. (“the Applicant”) is engaged in generating electrical energy through its solar power plant and has entered into contractual agreement to supply of electrical energy. The Applicant has filed an application for advance ruling as to whether the GST would be leviable in case of delivery of electrical energy and whether the Applicant would be eligible to claim and utilize the GST paid as ITC on procurement of solar power plant for discharging GST liability.

Issue:

Whether the Applicant is required to pay GST on sale of electrical energy?

Held:

The AAR, Maharashtra in GST/ARA/04 of 2023-24/2024-25-57 ruled as under:

• Opined that, the Electrical Energy would fall within the purview of goods as per GST Laws and supply Electrical Energy being goods is exempt from levy of GST vide Entry No. 104 of the Goods Rate Exemption Notification bearing Tariff Item No. 271600 00 on both intra and interstate supplies.
• Ruled that, the supply of electrical energy is exempt from levy of GST as per Entry No. 104 of the Goods Rate Exemption Notifications for both intra and inter-state supplies

Further ruled that, the Applicant would not be eligible to claim the ITC on its inward supplies as the outward supplies are exempt from levy of GST as per Section 17 of the CGST Act and Rule 42 and 43 of the CGST Rules.

Relevant Entry of the Notification:

Entry No. 104 of the Notification No. 2/2017-Central Tax (Rate) dated June 28, 2017:

Our Comments:

It is pertinent to note that no GST would be leviable on service of transmission of electricity as per Entry No. 25 of Heading 9969 of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017

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