Solar Power Exempt from GST, No Reverse Charge on Wheeling Charges: Tamil Nadu AAR

In re Kanthaammal Padmanaba Modern rice mill (GST AAR Tamil Nadu)

Summary: N Magesh Babu, proprietor of Sri Kanthaammal Padmanaba Modern Rice Mill, installed solar panels at Ogaiyur, Arni, to supply electricity to institutional customers. He sought an advance ruling on whether GST applied to the sale of solar electricity and whether he had to pay GST under reverse charge on wheeling, transmission, distribution, carrying, and operation and maintenance charges. The Tamil Nadu Authority for Advance Ruling admitted the application under Section 97(2)(b), (c) and (g) of the CGST and TNGST Acts after hearing the applicant’s representative on 21 July 2026.

The applicant relied on Section 2(23) of the Electricity Act, 2003 to equate electricity with electrical energy. He submitted that electrical energy falls under tariff item 2716 00 00 and is exempt under Entry 104 of Notification No. 2/2017-Central Tax (Rate) dated 28 June 2017. He also cited Entry 25 of Notification No. 12/2017-Central Tax (Rate) for transmission or distribution services and contended that the utility services used to deliver electricity did not create a reverse-charge liability for him.

The Tamil Nadu Green Energy Corporation Limited letter provided for a 3 MW solar plant to connect to the grid through the proposed feeder at Vellari Sub-Station. It required an Energy Wheeling Agreement and contemplated third-party wheeling under the non-REC intra-state open-access arrangement, with slot-to-slot adjustment for designated consumers. The AAR noted that metered energy injected into the grid would be credited against the customers’ consumption after transmission and wheeling losses and other adjustments. The distribution licensee would bill any balance energy at the applicable tariff, and the open-access charges would be settled separately.

The AAR identified two supplies: the applicant’s supply of electrical energy to Tamil Nadu Power Distribution Corporation Limited (TNPDCL) and TNPDCL’s wheeling service to the applicant for delivery to designated customers. It held that the supply of electrical energy was exempt under Entry 104 and answered the first question in the negative.

For Section 9(3), the AAR considered Notification No. 13/2017-Central Tax (Rate) and CBIC’s sectoral FAQs on Government services. It held that Tamil Nadu Transmission Corporation Limited (TANTRANSCO) and TNPDCL did not qualify as Government merely because of government ownership or control, so the notification’s reverse-charge entry for specified Government services did not apply. Section 9(4) also did not apply because both utilities were registered suppliers. The AAR therefore ruled out reverse charge for the applicant on the listed charges and left the taxability of the individual charges undecided.

SEO Titles

1. Solar Electricity Exempt from GST and No Reverse Charge on Utility Charges: Tamil Nadu AAR

2. No GST on Solar Electricity Under Entry 104: Tamil Nadu AAR

3. No GST Reverse Charge on Wheeling Charges Paid to TNPDCL and TANTRANSCO: Tamil Nadu AAR

4. Solar Power Wheeled Through Open Access Qualifies for GST Exemption: Tamil Nadu AAR

5. Registered Power Utilities’ Services Do Not Attract GST Under Section 9(4): Tamil Nadu AAR

FULL TEXT OF THE ORDER OF THE AUTHORITY FOR ADVANCE RULING, TAMIL NADU

M/s Kanthaammal Padmanaba Modern rice mill, having place of business at Building no. 53/1, Arcot Road, Irumbedu, Arni, Tiruvannamalai, Tamil Nadu- 632301 (hereinafter called as the “Applicant”) has registered with GSTIN 33AGKPM0089R2ZR under the Goods and Services Tax Act. They have filed this application for advance ruling under Section 97 of the CGST Act, 2017, and corresponding provisions under the Section 97 of TNGST Act, 2017. The Applicant has made a payment of application fees of Rs.10,000/- under sub rule (1) of Rule 104 of CGST Rules, 2017 and TNGST Rules, 2017.

2. Statement of relevant facts having a bearing on the questions raised.

The Applicant submits that the concern has installed solar panels having a total capacity of 3MWH at Sl. No. 1/2, 2/1, Ogaiyur, S.V. Nagaram (Panchayat), Arni, Tiruvannamalai, Tamil Nadu -632518, and plans to produce and supply electrical energy (electricity) to institutional customers. The Applicant is in the process of obtaining necessary licence from TNEB to commence the above activities. For operating & maintaining the transmission lines, TNEB will be collecting various charges from them such as ‘transmission charges, wheeling charges, carrying cost, loading and distribution charges, O&M charges, etc’.

3. The applicant has filed the present application for advance ruling seeking clarification on the following questions:

i Whether GST is payable on the electricity produced from solar panels, and sold to customers?

ii Whether the services availed from TNEB, and billed as ‘wheeling charges, transmission charges, distribution charges, carrying charges & operation & maintenance charges’, for transmitting the electricity produced by the applicant to its customers, is liable to reverse charge mechanism as per section 9(3) or 9(4) of the CGST/SGST Act, 2017?

4. Applicant’s interpretation of law:

4.1. The Applicant submits the following in respect of the electricity produced by the solar panels installed in their premises:

> As per serial no. 25 of notification no. 12/2017 (rate) dated 28.06.2017, transmission or distribution of electricity under heading 9969 by an electricity transmission or distribution utility is an exempted service. Therefore, the electricity generated from solar panels is exempted from GST.

> “Electricity” is defined in section 2(23) of the electricity act, 2003 as follows; “Electricity” means electrical energy — (A)Generated, transmitted, supplied or traded for any purpose; or (B) used for any purpose except the transmission of message. Therefore, the words “Electricity” and “Electrical energy” convey the same meaning. The Activity of the Applicant in the instant case is supply of electricity which is exempt goods under GST. The Applicant collects the value of electricity from the end customers.

> Electricity or electrical energy is a good falling under HSN 2716 00 00 of Customs Tariff Act. The supply of electrical energy is exempted from levy of GST vide entry at serial No. 104 of notification No. 2/2017-CT (Rate) dated 28.06.2017. Hence, the activity of generation of electricity from solar panels installed by them and the distribution of the same to the end customers is non-taxable or exempted under GST.

4.2. The Applicant submits the following in respect of the applicability of reverse charge mechanism on the charges to be collected by TNEB:

> “Transmit” as per Section 27(4) of the electricity Act, 2003, means conveyance of electricity by means of transmission lines and the expression “Transmission” shall be construed accordingly. As per section 2(19) of the electricity Act, 2003, “Distribution system” means the system of wires and associated facilities between the delivery points on the transmission lines or the generating station connection and the point of connection to the installation of the consumers.

> The Applicant uses the input services of TNEB for delivering electricity to the costumers, for which transmission and distribution charges apart from wheeling and other charges are paid to TNEB.

> the applicant is not engaged in the services of supplying electricity to the end customers and hence the provision of reverse charge mechanism shall not apply, and the applicant is not liable to pay tax under reverse charge for the services received from TNEB.

> As per section 10(1) of Electricity Act, 2003, applicant must establish, operate and maintain the dedicated transmission line from the power plant to substation for which TNEB shall be collecting O&M charges from the applicant.

> ‘Reverse charge’ means the liability to pay tax by the recipient of goods or services or both instead of the supplier of the goods or services or both, governed under subsection 3 and 4 of section 9 of CGST Act, 2017 or subsection 3 and 4 of section 5 of IGST Act, 2017.

5. The applicant is under the administrative control of State. The concerned authorities of the Centre and State were addressed to report if there are any pending proceedings against the applicant on the issues raised by the applicant in the ARA application and for comments on the issues raised. As remarks have not been received from Center and State authorities, it is assumed that there are no pending proceedings against the applicant on the issues raised by the applicant in the ARA application.

6. Personal Hearing

The applicant was given an opportunity to be heard in person on 21.07.2026. Shri. Vishal Kothari appeared for the personal hearing as the authorized representative (AR) of M/s. Sri Kanthaammal Padmanaba Modern Rice Mill. The AR reiterated the submissions made in their application for advance ruling, The AR further sought clarification as to whether the electricity generated from the applicant’s solar power plant (SPP) should be treated as an exempt supply, and whether GST is payable under reverse charge mechanism by the applicant on the various charges collected by the TNEB from them for the transmission of electricity to the customers of the applicant.

7. Discussions and Findings:

7.1. We have carefully examined the submissions made by the applicant in their advance ruling application and the submissions made during the personal hearing. We have also considered the issue involved, the relevant facts and the applicant’s submission / interpretation of law in respect of question on which the advance ruling is sought.

7.2. We find that the query is liable for admission as it gets covered under Section 97 (2) (b), (c) and (g) of CGST/TNGST Act, 2017 under

1. Applicability of a notification issued under provisions of the act

2. Determination of the liability to pay tax on any goods or services or both

3. Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

7.3. We note that the applicant has installed solar panels having a total capacity of 3MWH at Sl. No. 1/2, 2/1, Ogaiyur, S.V. Nagaram (Panchayat), Arni, Tiruvannamalai, Tamil Nadu -632518. They have produced a copy of the ‘Issuance of noted for record letter’ received from the Director, Tamilnadu Green Energy Corporation Limited(TNGECL) for establishment of the above SPP for ‘Wheeling of power for Third party use under non-REC scheme through Intra Open Access system’.

7.4. As per the ‘Issuance of noted for record letter’,

1. the proposed 3 MW SPP to be interfaced through the already proposed 33KV Sri Kanthaammal Padmanaba Modern Rice Mill Solar feeder which is to be connected at 33/11KV Vellari Sub – Station fed from 110/33-11KV Arni SS at 33KV level with necessary breaker, protection and metering arrangement as per TNGECL norms.

2. Energy Wheeling Agreement (EWA) to be executed with the SE/Tiruvannamalai EDC.

3. the energy generated from the SPP shall be wheeled to the following customers of the applicant and shall be adjusted on slot-to-slot basis as specified in solar tariff from time to time.

7.5. We first proceed to understand the activities involved in the whole system. We note that the energy generated from the SPP is to be injected into the electricity grid through the proposed 3 MW SPP and wheeled through the transmission/distribution network to the designated customers under the open-access arrangement. The generation and consumption are recorded through the energy meters, and the solar energy units injected into the grid are accounted for against the corresponding consumption of the designated customers, after applying the applicable transmission/wheeling losses and other regulatory adjustments. The balance energy, if any, is billed by the distribution licensee as per the applicable tariff, while applicable wheeling, transmission and other open-access charges are settled separately.

7.6. In the entire process, we note that the following are the supplies involved:

1. Supply of electricity by the applicant to the Tamil Nadu Power Distribution Corporation Limited (TNPDCL)

2. Supply of services by TNPDCL to the applicant by way of ‘Wheeling of Electricity’ to the customers of the applicant

7.7. Considering the above, we proceed to analyse the questions raised by the applicant one at a time.

1. Whether GST is payable on the electricity produced from solar panels, and sold to customers?

a. Notification No.2/2017-Central Tax (Rate) dated 28.06.2017 (as amended) states that:

In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods, the description of which is specified in column (3) of the Schedule appended to this notification, falling under the tariff item, sub heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Schedule, from the whole of the central tax leviable thereon under section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017).

Schedule

b. As per Sl. No. 104 of Notification no. 2/2017 – Central Tax (Rate) dt. 28.06.2017 (as amended), Electrical energy is exempted from levy of tax under GST. In the present instance, we note that the applicant is involved in the supply of electricity to TNPDCL and is therefore exempted from GST as per Sl. No. 104 of Notification no. 2/2017 – Central Tax (Rate) dt. 28.06.2017.

2. Whether the services availed from TNEB, and billed as ‘wheeling charges, transmission charges, distribution charges, carrying charges & operation & maintenance charges’, for transmitting the electricity produced by the applicant to its customers, be liable to reverse charge mechanism as per section 9(3) or 9(4) of the CGST/SGST Act, 2017?

a. We note that TNEB was converted into a holding company (TNEB Limited) in 2010, with Tamil Nadu Transmission Corporation Limited(TANTRANSCO) and TANGEDCO as subsidiary companies. While TANTRANSCO is an electric power transmission system operator, TANGEDCO is an electrical power generation and distribution public sector undertaking. In 2024, after further restructuring, the generation activities were transferred to Tamil Nadu Power Generation Corporation Limited (TNPGCL), distribution operations to Tamil Nadu Power Distribution Corporation Limited (TNPDCL), and renewable energy assets to Tamil Nadu Green Energy Corporation Limited (TNGECL).

b. The applicant has sought to know whether ‘wheeling charges, transmission charges, distribution charges, carrying charges & operation & maintenance charges’ are liable to GST under the reverse charge mechanism as per Section 9(3) or 9(4) of the CGST/SGST Act, 2017.

c. Section 9(3) of the CGST Act states —

“The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both”.

d. As per Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017, Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding a few services is liable for GST under reverse charge mechanism by the recipient of such services.

e. CBIC has in the Sectoral FAQs on ‘Government services’ clarified that a corporation or company formed by a government is not itself the Government merely because it is owned or controlled by Government:

f. We therefore conclude that the TANTRANSCO/TNPDCL is not ‘Government’, and therefore there is no liability for payment of GST under RCM as per Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017 on the services provided by TANTRANSCO/TNPDCL to the applicant.

g. Section 9(4) of the CGST Act states-

“The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both”.

h. Section 9(4) of the CGST Act prescribes GST under reverse charge basis on specified services received from an unregistered supplier. Since TANTRANSCO/TNPDCL are registered service providers, we note that Section 9(4) does not apply to the recipients of service from TANTRANSCO/TNPDCL.

i. We therefore hold that the applicant is not liable to pay GST under the reverse charge mechanism as per Section 9(3) or 9(4) of the CGST/SGST Act, 2017, without going into the details of the charges levied by TANTRANSCO/TNPDCL, and taxability thereof.

8. In view of the above, we rule as under:

Ruling

i Whether GST is payable on the electricity produced from solar panels, and sold to customers?

Answer: No

ii Whether the services availed from TNEB, and billed as ‘wheeling charges, transmission charges, distribution charges, carrying charges & operation & maintenance charges’, for transmitting the electricity produced by the applicant to its customers, be liable to reverse charge mechanism as per section 9(3) or 9(4) of the CGST/SGST Act, 2017?

Answer: No